INVESTMENT HIGHLIGHTS

• 3QFY18 normalised loss narrowed to –RM32.5m (3QFY17: - RM50.3m) resulting mainly from cost improvement initiatives

• Nonetheless, recovery in 9MFY18 earnings is much slower than expected, dragged by the traditional media

• This could prompt the group to be more aggressive in driving down operating costs

• Downgrade to SELL with a revised target price of RM0.35 based on price-to-book valuation methodology

Remains in the red. Media Prima Bhd (MPB) 3QFY18 normalised losses narrowed down to –RM32.5m. This was an improvement from a loss of –RM50.3m attained in 3QFY17. The improvement in the financial performance was mainly attributable to lower depreciation and amortisation charges (+28.7%yoy) and the group’s operating cost improvement initiatives.

Disappointing 9MFY18 financial performance. Cumulatively, 9MFY18 normalised loss amounted to -RM72.7m which is a slight improvement to 9MFY17 normalised loss of -RM76.7m. The underperformance still stem from the group’s traditional media platform (refer to Table 1). All in, we opine that the improvement in the 9MFY18 financial performance is much slower than anticipated, in comparison with our previous FY18 loss estimates of -RM63.6m.

Resilient cash and bank balance. The group’s cash and bank balance stands at RM257.8m, a marginal decrease of -1.7%yoy. Note that the group is also monetising its existing asset in effort to build up sizeable cash pile to support its odyssey strategy. In view of this, we reiterate our view that the group will not distribute any dividend in the foreseeable term.

Impact to earnings. We are maintaining FY18 and FY19 revenue at this juncture. However, we are reducing FY18 and FY19 loss further to –RM104.0m and –RM57.7m respectively as we input higher operating costs in-line with the group’s financial performance thus far.

Target price. Subsequent to our earnings adjustment, we derive a revised target price of RM0.35 (previously RM0.42) based on price-tobook valuation methodology. We are attaching target price-to-book ratio of 0.75x which is the three year historical rolling average to revised FY19 net asset of 47sens.

Source: MIDF Research - 22 Nov 2018