INVESTMENT HIGHLIGHTS

• 2QFY18 normalised loss improved sequentially to - RM18.2m, leading to 1HFY18 normalised loss of -RM39.8m

• Expecting quarterly loss to narrow down further in the successive quarters

• Building up cash pile via assets monetisation to support the implementation of its ‘odyssey’ strategy

• Revert to NEUTRAL with a revised target price of RM0.42

Still in loss-making position. Media Prima Bhd (MPB) 2QFY18 normalised losses narrowed down to -RM18.2m. This was an improvement from a loss of -RM21.1m in 1QFY18. The improvement in the financial performance was mainly attributable to higher contribution from NSTP, digital media and content creation. In addition, its aggressive cost rationalisation exercise help to keep operating costs at bay.

Within expectation. Cumulatively, 1HFY18 normalised loss amounted to -RM39.8m, which came in within our expectation. Note that we are expecting MPB’s quarterly loss to narrow down further in the successive quarters.

Advocating an asset-light strategy. MPB announced that it is disposing the Bangsar property, Shah Alam property and Shah Alam vacant land to PNB Development Sdn Bhd for a total cash consideration of RM280.0m. This will increase MPB’s cash and bank balance to RM513.2m. As part of the condition of the disposal, MPB will lease back both the Bangsar and Shah Alam property from PNB Development for a combined annual rental fee of RM16.6m. MPB will record a one-off gain on disposal of RM127.7m. In addition, the exercise will also lead to annual saving in operating costs amounting to RM10.0m. The sale proceed will be used mainly to pare down its borrowings. Note that as at 2QFY18, MPB’s total borrowings stands at RM301.9m.

Impact to earnings. We are maintaining our FY18 loss estimate at this juncture. However, we are reducing FY19 loss estimate lower to - RM 17.2m from RM-27.2m previously to take into account the operating costs savings from the group’s sales and leaseback activities.

Source: MIDF Research - 3 Sept 2018