INVESTMENT HIGHLIGHTS

• 1QFY19 core losses deepen by -86.7%yoy to –RM37.2m, fall short by our and consensus expectations

• This was mainly attributable to both decline in advertising expenditure (adex) and newspaper sales

• Digital segment was also hit by weak digital adex amid a slowing economic growth

• Maintain SELL with a revised target price of RM0.32 based on price-to-book valuation methodology

Losses widen. Media Prima Bhd’s (MPB) 1QFY19 core losses came in higher-than-expected to –RM37.2m as compared against –RM20.0m losses in the previous corresponding period. This was primarily due to the deteriorating adex environment impacting negatively especially emanating the traditional segment. Note that the digital segment suffered losses as well.

Traditional segment deteriorated further. The traditional segment’s 1QFY19 revenue declined by -23.0%yoy to RM167.0m, mainly due to lower advertising expenditure and newspaper sales. The net revenue made from adex and circulation has fallen by -22.0%yoy and -30.0%yoy to RM150.0m and RM15.1m respectively. To recall, the traditional segment still account for over 70% of the group’s total revenue. Thus, the traditional media platform continues to be severely impact the group’s overall financial performance (refer to Table 1).

Slight decline in the digital segment’s revenue. The total revenue from the digital segment in 1QFY19 dropped to RM17.4m as compared against RM19.1m recorded in 1QFY18. This was mainly contributed by the reduction in digital advertising and commerce activities by -5.0%yoy and -52.0%yoy to RM16.7m and RM0.6m respectively. Moving forward, we opine this segment would gradually improves given the sector’s structural shift to digital advertising and the group’s main focus on growing its digital prowess in FY19.

Home-shopping improved. In 1QFY19, revenue from CJ WoW Shop maintained a steady growth of +24.0% to RM54.5m, accounting for about 23% of the group’s total revenue. Sales growth mainly coming from its mobile application which increased by 31.0%yoy while the TV platform dropped by -12.0%yoy. However, its earnings from this segment are still in negative territory, declining by -4.0%yoy.

Source: MIDF Research - 31 May 2019