Overhaul Likely to Take Time

Media Prima (MPR) posted a 1H18 core net loss of RM39.9m, which came in wider than our previous projected core net loss of RM33m for 2018E. The variance against our forecast was largely due to higher-than-expected costs associated with the OOH and commerce segments. We now project 2018E core net loss of RM63.9m. We maintain our SELL on MPR but with a higher TP of RM0.36, based on a 0.9x 2019E NTA per share (the higher NTA was due to the proposed sale of properties).

Core Net Loss of RM39.9m in 1H18

MPR’s 1H18 revenue improved by 4% yoy to RM623m, mainly due to higher revenue contribution coming from the home-shopping (+63%), digital media (>100%) and out-of-home (OOH) (+5%) divisions. On the other hand, revenue contribution was lower yoy from print media (-11%), TV network (-7%) and content (-38%) divisions. After excluding proceeds from the sale of an associate and other one-off items, MPR recorded a core net loss of RM39.9m in 1H18, vs. core net loss of RM29.4m in 1H17. Our going-in and consensus earnings projections for 2018E called for a loss of RM33.2m and RM47.0m, respectively. Variance to our projections was mainly due to higher-than-expected costs associated with the OOH and commerce segments.

Decent Top-line Performance Sequentially

Revenue was up 22% qoq to RM324.4m, mainly due to TV networks (+47%), OOH (+22%), digital media (+28%) and home-shopping (+18%). After excluding one-offs, MPR’s 2Q18 core loss narrowed to RM18m from RM21.8m in 1Q18. This comes from an improvement in TV advertising revenue (driven by festive season) as well as strong momentum from commerce (due to higher products offering and better presence on TV).

Maintain SELL With a New TP of RM0.36

In light of the wider-than-expected core losses, we now project a 2018E core net loss of RM63.9m, from RM33.2m previously. Nevertheless, following the proposed sale of land by the group to PNB development (please refer to page 2), we revise up our 12-month TP on MPR to RM0.36 (from RM0.24) based on an unchanged 0.9x (2SD below 3- year average) 2019E NTA per share. We are maintaining our SELL rating on the stock (12% downside to our new TP), as we remain cautious on the near term outlook of MPR’s key traditional media businesses given the continuous challenges/uncertainties in the market.

Source: Affin Hwang Research - 3 Sept 2018