Media Prima (MPR) posted a 2018 core net loss of RM101.1m, which came in lower than our and the consensus projected core net loss of RM90.9m and RM81.2m, respectively. Given the subdued outlook in the adex market coupled with high operating costs, we now project a 2019E core net loss of RM51.9m. We maintain our SELL call on MPR with a lower TP of RM0.27.

Core Net Loss of RM101.1m in 2018

MPR posted revenue of RM1.19bn (-1.1% yoy) in 2018, on the back of higher contributions from the digital (>100%), home-shopping (+64.6%) and out-of-home (+0.3%) segments. However, key segments continue to be a drag on the group, with the TV, print, radio and content divisions’ revenue declining by 12.3%, 16.8%, 19.8% and 21.4% yoy respectively. After stripping off exceptional items, which includes impairments, disposal of PPE and a provision for termination benefits, MPR recorded a core net loss of RM101.1m in 2018 vs. a core net loss of RM144.1m in 2017. This came in lower than our and the consensus projected core loss of RM90.9m and RM81.2m respectively. The variance was mainly due to a higher-than-expected costs associated with the TV and print segments.

Better Sequential Top Line But Hampered by Higher Costs

4Q18 revenue performed better sequentially at RM290.9m (+7.0% qoq) as most segments reported improvements, while the print division’s revenue declined by -16.6% qoq as circulation and ad revenue remained weak. However, MPR’s 4Q18 core net loss widened to RM47.3m from RM32.5m in 3Q18 after accounting for one-offs, largely due to higher operating costs.

Maintain SELL With a Lower TP of RM0.27

We now project a 2019E core net loss of RM51.9m (from RM38.1m previously), in light of the weaker-than-expected 2018 results. Moving into 2019, we continue to expect management to undertake further costrationalisation exercises in addition to ramping up its digital and commerce revenue. Our TP on MPR is revised lower to RM0.27 (from RM0.30) based on an unchanged 0.9x (2SD below 3-year average) applied to our 2019E NTA per share. Given the lack of immediate catalysts for its operations, we remain fairly cautious at this junction.

Source: Affin Hwang Research - 27 Feb 2019