• MPR reported a core net profit of RM25.3m in 4Q20 (>100% qoq), which came in above our expectations due to higher ad revenue and lower-than-expected operating expenses
• Given the better 2020 results, we now project a core net profit for 2021E/22E of RM18.3m/RM31.8m
• In tandem with our earnings upgrade, we lift our TP for MPR to RM0.54, based on a 2021E P/BV of 1x. We upgrade the stock to a HOLD from SELL, previously as we turn more positive on MPR’s transformation efforts but we are still cautious on the media industry given the Covid-19 uncertainties

Stronger Core Net Profit at RM25.3m in 4Q20, Up >100% Qoq

Media Prima’s (MPR) 4Q20 revenue increased by 10.9% qoq to RM298.1m, mainly due to higher ad revenue during the quarter given the increased business activities. For 4Q20, MPR posted a higher PBT by 12.1% qoq to RM21.1m. Excluding one-offs, MPR posted a higher core net profit of RM25.3m in 4Q20, up 25.3% qoq, due to higher ad revenue and cost management initiatives by the group.

2020 Core Net Loss Narrowed to RM4.6m – Beating Our Expectations

MPR’s 2020 revenue declined by 5.8% yoy to RM1.04bn, mainly due to lower ad revenue as clients’ ad spending were scaled down during the COVID-19 pandemic (especially during the MCO period), but this was partly cushioned by better performance from its 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 (which includes waivers on lease payments, rebates on license fee, impairment, termination benefits and loss on disposal of PPE) of RM5.8m in 2020, narrowing sharply from a LBT of RM173m in 2019. After excluding one-offs, MPR posted a narrower core net loss of RM4.6m in 2020 vs a RM63.1m core net loss in 2019. This came in above our expectations and the variance was partly attributable to higher ad revenue and lowerthan-expected opex due to cost savings initiatives.

Upgrade to HOLD With Higher TP of RM0.54

Given the better 2020 results, we now project 2021-22E core net profit of RM18.3m/RM31.8m after taking into account lower opex and higher ad revenue. In tandem with our earnings upgrade, we lift our TP for MPR to RM0.54, based on a 2021E P/BV of 1x (updated 7-year average). We upgrade the stock to a HOLD from SELL previously, as we turn more positive on MPR’s transformation efforts but we are still cautious on the media industry given the Covid-19 uncertainties.

Source: Affin Hwang Research - 26 Feb 2021