• MPR reported a core net profit of RM6.7m in 3Q20 vs a core net loss of RM7.6m in 2Q20 due to higher ad revenue and cost management initiatives. This was above our expectations due to lower-than-expected operating expenses.
• We now project a narrower core net loss for 2020E/21E of RM32.7m/RM10m, after taking into account lower opex. We expect 4Q20 to remain challenging with the ongoing uncertainties due to Covid-19 and CMCO.
• Maintain SELL rating on MPR but with a new 12-month TP of RM0.15.

Returning to black on higher ads and cost savings initiatives

Media Prima’s (MPR) 3Q20 revenue increased by 13.7% qoq to RM268.8m, mainly due to higher ad revenue given the increased business activity following implementation of the nationwide Recovery Movement Control Order (RMCO). For 3Q20, MPR posted a PBT (which includes waivers on lease payments, rebates on license fee, impairment and loss on disposal of PPE) of RM18.9m vs a LBT of RM17.1m in 2Q20. Excluding the oneoffs, MPR posted a core net profit of RM6.7m in 3Q20, improving from a core net loss of RM7.6m in 2Q20. This was partly attributable to higher ad revenue and cost management initiatives by the group.

9M20 core net loss narrowed to RM29.9m – above expectations

MPR’s 9M20 revenue declined by 7.2% yoy to RM743.5m, on the back of declines seen in the traditional media segments – broadcasting (TV and radio), out-of-home and publishing. The decline in revenue was partly attributable to lower ad revenue as clients’ ad spending was scaled down during the COVID-19 pandemic (especially during the MCO period), but this was partly cushioned by better performance from the digital media (due to better synergies achieved) and home shopping (due to higher viewership and shift in consumer spending habits) divisions. MPR posted a LBT of RM26.9m in 9M20, narrowing from a LBT of RM73.3m in 9M19. After excluding one-offs, MPR posted a narrower core net loss of RM29.9m in 9M20 vs a RM70.5m core net loss in 9M19. This came in above our expectation and the variance was partly attributable to lower opex due to cost savings initiatives.

Maintain SELL rating but with a new TP of RM0.15

Given the better 9M20 results, we now project narrower core net losses for 2020/21 of RM32.7m/RM10m, after taking into account lower opex. Nevertheless, we think MPR’s 4Q20 could potentially be loss-making as ad revenue could be impacted again due to uncertainties and the CMCO brought on by the COVID-19 pandemic. We maintain our SELL rating but raise our TP to RM0.15, based on a 2021E P/NTA of 0.75x.

Source: Affin Hwang Research - 19 Nov 2020