Media Prima (MPR) posted a narrower 1Q20 core net loss of RM29.9m vs. a RM37m core net loss in 1Q19, attributed to cost management initiatives by the Group. We expect 2020 to be another tough year for MPR due to the economic uncertainties, but partially mitigated by cost savings from the recent staff-rationalization exercise in 1Q20. We roll forward our valuation horizon to 2021E, and revise our target price for MPR to RM0.13 (from RM0.12), based on an unchanged target P/NTA of 0.7x. After a 14.8% price gain over the past one month, the potential downside to our new TP is 16.1%. We downgrade MPR to SELL.

1Q20 Core Net Loss Narrowed to RM29.9m Vs. RM37m in 1Q19

MPR’s 1Q20 revenue was flattish at RM238.4m (-0.3% yoy), on the back of declines seen in the traditional media segments: TV (-8.6%), print (-9.7%), radio (-56%) and out-of-home (-3%). Meanwhile, better performance from digital (+50.3%), home shopping (+18.3%) and content creation (>100%) partially cushioned the group revenue’s contraction. The decline in traditional media’s revenue was mainly due to the lower advertising take-up given the cautious spending by advertisers. Nevertheless, after excluding one-offs, MPR posted a narrower core net loss of RM29.9m in 1Q20 vs. a RM37m core net loss in 1Q19 as a result of cost management initiatives by the group.

Weaker Sequentially Due to Lower Adex

On a sequential basis, MPR’s revenue declined by 21.7% qoq to RM238.4m, mainly due to lower advertising spend by clients as they turned cautious on the economic outlook. MPR reported a lower LBT of RM28.7m in 1Q20 vs. a LBT of RM99.7m in 4Q19 as 4Q19 included a provision of RM75m for staff termination costs. Excluding the one-offs, MPR posted a core net loss of RM29.9m in 1Q20 as compared to core net profit of RM7.4m in 4Q19.

Cautious on Media Sector Outlook

We make no changes to our earnings forecasts. We expect 2020 to be another challenging year for MPR due to uncertainties surrounding the Covid-19 situation and its impact on global and domestic economies. Nevertheless, we believe this will be partly mitigated by cost savings from the recent staff-rationalization exercise in 1Q20.

Source: Affin Hwang Research - 22 May 2020