Media Prima (MPR) posted a 9M18 core net loss of RM72.6m, which was below our previous projected core net loss of RM63.9m for fullyear 2018. Given the persistent weakness in MPR’s core segments, mainly attributed to declining advertisement spending and hard-copy circulation, we now project a larger 2018 core net loss of RM88m. We maintain our SELL on MPR with a lower TP of RM0.33, based on 0.9x 2019E NTA per share.

Larger-than-expected Core Net Loss of RM72.6m in 9M18

MPR posted a flattish 9M18 revenue at RM894.8m (+0.6%), on the back of positive contributions from the digital (>100%), commerce (+63.4%) and out-of-home (+2%) segments. However, key segments such as TV networks, publishing and content creation continued to disappoint, declining by 8%, 17% and 31% yoy, respectively. After excluding one-off items, MPR recorded a core net loss of RM72.6m in 9M18 vs a core net loss of RM78.5m in 9M17. Our previous and consensus earnings projections for 2018E are a loss of RM63.9m and RM52.9m, respectively. The variance to our projection was mainly due to lower-than-expected contributions from key segments (TV networks and publishing) as well as higher-than-expected costs associated with the publishing segments.

No Signs of Weakness Waning in Key Divisions

Sequentially, MPR’s 3Q18 revenue stood at RM272m, declining by 20.6% qoq, with most segments seeing a decline after having a good preceding quarter (2Q18). With the exception of home shopping (+7.5% qoq), all other divisions saw a drop in revenue qoq mainly due to lower advertising and circulation revenue. MPR’s 3Q18 core loss widened to RM33m from RM18m in 2Q18 after stripping out one-offs.

Maintain SELL With a New TP of RM0.33

We now project a higher 2018E core net loss of RM88m from RM63.9m previously, in view of the poor 9M18 results. We lower our TP on MPR to RM0.33 (from RM0.36) based on an unchanged 0.9x (2SD below 3- year average) 2019E NTA per share. We are keeping our SELL rating on the stock (20% downside to our new TP), as we remain cautious on the near-term outlook of MPR’s key traditional media businesses given the continued weaknesses/uncertainties in the market.

Key Risks

The potential upside risks to our recommendation would be: 1) higherthan-expected adex revenue; 2) a substantial increase in hard-copy newspaper circulation and 3) an upward spike in sales contributions from the new digital and consumer-based businesses.

Source: Affin Hwang Research - 22 Nov 2018