Media Prima (MPR) recorded a 1Q19 core net loss of RM37.2m, which was worse than our expectation given our previous full-year core net loss forecast of RM51.9m; the consensus full-year core net loss forecast is RM33.5m. In light of the downbeat quarter, we now project a wider core net loss of RM81.9m for 2019. We reaffirm our SELL rating on MPR, with a lower TP of RM0.24 after rolling forward our valuation year to 2020E at a 0.9x NTA per share of RM0.26.

Weaker Yoy Performance for Most Segments

MPR posted a lower 1Q19 revenue of RM239.1m (-14.8% yoy), as most of its segments showed revenue declines yoy: TV (-12.4%), print (-41.4%), OOH (Out-of-home; -2.3%), radio (-1.6%), digital (-34.7%) and content (- 44.1%). The only outperformer in 1Q19 was the home-shopping segment which posted a higher revenue of RM54.5m (+23.7% yoy), attributable to higher sales of products as a result of more airtime. Excluding one-off items, MPR recorded a core net loss of RM37.6m in 1Q19 vs. a core net loss of RM19.9m in 1Q18. The major culprit of the wider losses was the print segment as both adex and hardcopy circulation continued to weaken.

1Q19 Core Net Loss Narrowed Qoq

Sequentially, all segments posted a decline in revenue (-17.8% qoq) in a seasonally weaker quarter. Amongst the hardest hit on a qoq basis were content (-60.3%), radio (-33.7%), and digital (-25.7%). Nevertheless, core net loss narrowed to RM37.2m in 1Q19 vs. RM47.3m in 1Q18 due to better cost management. Moving forward, while we expect losses to narrow as management is committed to strengthening the key growth areas of digital and commerce, and continual cost management initiatives, a turnaround may prove difficult given the challenging environment.

Reiterate SELL With a Lower TP of RM0.24

In view of the wider-than-expected losses in 1Q19, we now project a 2019 core net loss of RM81.9m from RM51.9m previously, mainly to take into account lower revenue from TV, print and radio. We reiterate our SELL rating on MPR with a lower TP of RM0.24 (from RM0.27) based on an unchanged 0.9x (2SD below 3-year average) applied to our 2020E (rolled forward from 2019E) NTA per share. We remain cautious given the lack of immediate catalysts and a subdued adex sentiment.

Source: Affin Hwang Research - 31 May 2019