INVESTMENT HIGHLIGHTS

• FY18 normalised loss narrowed to -RM106.4m (FY17: - RM153.2) resulting from cost rationalisation measures

• Full year core losses in line with our expectation, but fall short of consensus expectation

• Earnings recovery continue to be dragged by traditional media despite higher sales from digital segments

• High value non-core assets seem to have depleted, signalling further tightening period moving forward.

• Maintain SELL with a revised target price of RM0.41 based on price-to-book valuation methodology

Remain in a loss-making position. Media Prima Bhd (MPB) FY18 normalised losses narrowed down to –RM106.4m. This was an improvement (+30.6%yoy) from a loss of –RM153.2m posted in FY17. The improvement in the financial performance was mainly attributable to lower depreciation and amortisation (D&A) charges (-31.2%yoy) and the group’s operating cost improvement initiatives which includes ongoing manpower rationalisation across the group).

FY18 core earnings came in in-line with our expectation. FY18 normalised loss amounted to –RM106.4m, which came in within but below consensus expectation, accounting for 104.0% and 81.2% of full year FY18 earnings estimates. The traditional media platform continue to severely impacted the group’s overall financial performance (refer to Table 1). Given the difficulty in growing the revenue, the group is looking internally to improve the cost structure. This includes lowering the depreciation and amortisation expenses in-line with its asset-light strategy.

Slight improvement in cash and bank balance. The group’s cash and bank balance stood at RM210.1m, a marginal increase of +2.0%yoy. Note that proceeds from the disposal of its big-ticket assets have been channelled to significantly pare down its borrowings. In view of this, we reiterate our view that the group will not distribute any dividend in the foreseeable term. By paring down the long term borrowings, the group is in a net cash position of RM206.0m as at FY18 compared against a net debt of RM108.2m as at FY17. This enables the group to allocate its existing resources to hunt for potential synergistic M&A opportunities and reinvest into its digital transformation plan.

Source: MIDF Research - 28 Feb 2019