Media  Prima  (MPR)’s 1QFY13  net  profit  of  RM27.1m  (+30.3%  y-o-y)  was well within our and street expectations. We remain upbeat on the Media sector for 2H and retain MPR as our sector Top Pick. Maintain BUY, with our  FV  revised  upwards  to  MYR3.00,  derived  from  15x  FY13F  P/E (previously 14x), or +0.5 SD from the mean of its 5-year historical trading band.  

-  1Q  numbers  stronger  y-o-y.  MPR’s  1Q’s  revenue  of  MYR365.8m (+9.1% y-o-y, -23.4% q-o-q) and net profit of MYR27.1 (+30.3% y-o-y, -62.9%  q-o-q)  were  well  within  our  expectations.  Although  the  numbers were lower compared to 4QFY12, we deem that to be normal as 1Q has always  been  the  weakest  quarter  in  terms  of  advertising  expenditure (adex).  Nonetheless,  the  overall  Malaysia  adex  in  1QCY13  has  been growing steadily (+19.2% y-o-y) and that is a positive indicator for media companies.

- Outlook  brighter  after  election.  In  our  “Sector  On  The  Mend” sector update  published  on  19  April,  we  highlighted  that  adex  should  pick  up after  the  removal  of  election  uncertainties.  As  such,  we  expect MPR’s 2Q’s numbers to perk up and the improvement may be more significant in  2H  as  a  series  of  festivities  and  year-end  sales  would  spur  adex. Therefore,  we  are  maintaining  our  projections  at  this  juncture,  assured that MPR would be able to meet our year end forecast.

-  Election contribution impact. We do not deny the fact that 1Q’s adex numbers  may  be  inflated  by  election-related  advertisements  and  that investors  may  be  concerned  that  adex  would  drop  after  the  elections. Based  on  our  market  source,  election-related  ads  accounted  for  10%-15%  of  the  country’s total  1Q  adex.  We  believe  it  would  not  be  too difficult for the increased advertising activities among business entities to cover  for  the  shortfall  from  the  absence  of  election-related ads.  Hence, we remained upbeat on the outlook of the industry.

Source: RHB