• MPR’s 2Q20 core net loss narrowed to RM5.6m (-80.6% qoq) due to cost savings initiatives done by the group. This was within our expectations. MPR also incurred a RM11.3m termination benefits charge in 2Q20.
• We make no changes to our 2020-22E core EPS forecasts. We expect 2H20 to remain challenging with the uncertainties due to COVID-19 but this will be partially offset by the cost management initiatives.
• Maintain SELL rating on MPR with an unchanged 12-month TP of RM0.13.

2Q20 Core Net Loss at RM5.6m, Narrowing Sharply Qoq

MPR’s 2Q20 revenue declined marginally by 0.9% qoq to RM236.3m, as the cut in ads revenue was offset by higher contribution from the home shopping business. For 2Q20, MPR posted a LBT of RM17.1m, narrowing from the LBT of RM28.7m in 1Q20. This was partly attributable to lower operating expenses (due to cost savings initiatives done by the group) despite the termination benefits charge incurred in the quarter of RM11.3m. Excluding the one-offs, MPR’s core net loss narrowed by 80.6% qoq to RM5.6m in 2Q20.

6M20 Core Net Loss at RM34.5m – Within Expectation

Media Prima’s (MPR) 6M20 revenue declined by 11.4% yoy to RM474.7m, on the back of declines seen in the traditional media segments – broadcasting (TV and radio), out-of-home, publishing and content creation. The decline in revenue was partly attributable to lower ads revenue as clients’ ad spending was scaled down during the COVID-19 pandemic (especially during the Movement Control Order period), but this was partly cushioned by better performance from the digital media and home shopping divisions. MPR posted a LBT of RM45.8m in 6M20 vs. a LBT of RM48.1m in 6M19. After excluding one-offs, MPR posted a narrower core net loss of RM34.5m in 6M20 vs. a RM46.7m core net loss in 6M19 due to cost management initiatives by the group.

Maintain SELL Rating and TP

We expect 2H20 to remain challenging for the group due to the uncertainties and weak consumer sentiment brought on by the COVID-19 pandemic and its impact on the economy. Nevertheless, we believe this will be partially mitigated by cost savings initiatives. We make no changes to our earnings forecasts. We maintain our SELL rating and TP of RM0.13, based on a 2021E P/NTA of 0.7x.

Key Risks

The upside risks to our SELL recommendation would be: 1) major restructuring plans by the new major shareholder that would improve its long-term prospects, 2) if an MGO is triggered; 3) higher-than-expected adex revenue; 4) a substantial increase in hard-copy newspaper circulation and 5) a significant increase in contributions from the digital and home-shopping businesses.

Source: Affin Hwang Research - 28 Aug 2020