In view of Media Prima’s (MPR) progressive shift toward being a commerce and digital content entity, we think prospects of both the segments should gradually carry more weight towards the valuation of MPR. However, near term, the group’s core TV and print segment continue to be a major drag. Hence, we think it is still too early to get excited over the stock, despite the better prospects of its digital and commerce venture and the presence of a new major shareholder. Reiterate SELL with a TP of RM0.38 based on 1.5x 2020E NTA.

Aurora Mulia’s Stake at 20.6%

Aurora Mulia Sdn Bhd, a company reportedly linked to Tan Sri Syed Mokhtar had acquired 20.6% stake in MPR since July 2019. We believe Syed Mokhtar could be eyeing the home-shop & digital segments within MPR which has inadvertently been increasing revenue contribution to the group (6M19: 25% vs 6M18: 19%) as opposed to traditional media assets (TV, print, radio) which shrunk to 59% in 6M19 from 66% in 6M18.

Commerce & Digital Expected to Take Lead in the Long Run

Among MPR’s 7 business segments, it is apparent that the homeshopping and digital segments are delivering the highest growth prospects. As part of MPR’s transformation plan, management is targeting to achieve 40% commerce & non-ads revenue and 20% in digital revenue, from 2020 onwards. In view of the progressive shift toward being a commerce and digital content entity, we think prospects of both these segments should gradually carry more weight in the valuation of MPR.

Analogue-switch-off (“ASO”) Expected by End-September

Separately, the Malaysian Communications and Multimedia Commission (“MCMC”) announced that a full ASO will be carried out in stages by endSeptember. We are neutral on this given that any potential cost savings may be negated by risk of greater competition within the FTA space as ad pricing could be affected as a result of a more fragmented viewership.

Maintain SELL With An Unchanged TP of RM0.38

We made no major changes to our earnings estimates, projecting core net loss at RM82m/55m/40m over FY19-21E. We reaffirm our valuation target of 1.5x (1SD below 3-year average) 2020E NTA per share of RM0.25. Despite better prospects of its home-shop (still running at a loss) and digital venture, also with the presence of a new major shareholder, we think it is still too early to get excited over the stock. Given a 21% potential downside to our TP of RM0.38, we reiterate our SELL rating.

Source: Affin Hwang Research - 12 Sept 2019