INVESTMENT HIGHLIGHTS

• The group performed better than expected in FY16

• Out-of-home segment is the main earnings contributor

• Attractive dividend yield of more than 7.5%

• Upgrade to NEUTRAL with a revised target price of RM1.10 per share

Higher 4Q16 profit. Media Prima Bhd (MPB) reported 4Q16 earnings of RM5.0m. After adjusting for exceptional items amounting to +RM36.0m, MPB’s normalised earnings came in at RM41.0m (+31.3%yoy). The bulk of the exceptional items pertained to start-up cost of new initiatives which are currently in period of gestation (- RM30.7m).

Better than expected. Despite the improvement in 4Q16 normalised earnings, full year FY16 normalised earnings was down by -41.4%yoy to RM82.2m. This is after adjusting for exceptional items amounting to RM141.4m, which mainly consist of restructuring expenses (–RM97.9m) and start-up costs of new initiatives (-RM43.4m). The drop in earnings was mainly attributable to poor performance from the print media and television network (TVN) segments. Nonetheless, the results came in better than our and consensus expectations, accounting for 159.3% and 112.4% of full year FY16 earnings forecasts respectively.

Dividend. In 4Q16, the group declared dividend of 4sen per share. This led to full year FY16 dividend declared of 8sen per share. In comparison, MPB has declared dividend of 10sen per share in FY15.

Impact on earnings. We are revising upwards the earnings contribution from radio and out-of-home (OOH) segments. In addition, we are now expecting the TVN segment to contribute positively to the group’s bottomline. All in, we increased our FY17 earnings by +39.2%.

Target price. Following our earnings revision, we derive a revised target price of RM1.10sen per share (previously RM0.82sen per share). Our target price assumption is based on FY17EPS of 7.6sen against its 5-year historical average PER of 14.5x.

Upgrade to NEUTRAL. Despite challenging market environment, the group has performed above our expectation. The TVN segment, which we initially viewed to be loss-making, has managed to remain profitable. In addition, we expect the OOH segment to deliver better earnings perform better due to additional earnings contribution from the MRT project. This would help to provide some support to the ailing print segment. Due to the share price weakness, we belief the stock has an attractive dividend yield of more than 7.5%, supported by its healthy cash position. All factors considered, we upgrade the stock to NEUTRAL from SELL previously

Source: MIDF Research - 24 Feb 2017