Media Prima’s 1QFY14 net profit of MYR27.0m is within our expectations. Despite a decline in revenue, it was able to maintain its earnings margin. Its growth strategy – growing the digital media and content creation segments – is on track. The adex in 2014 will be supported by major events such as World Cup and other sports events.Maintain BUY, FV of MYR3.06 unchanged.

• 1Q earnings flattish y-o-y. Media Prima’s 1QFY14’s revenue of MYR351.0m (-4.0% y-o-y) and net profit of MYR27.0m (-0.3% y-o-y) came in within our expectations. Although revenue declined y-o-y, Media Prima was still able to maintain its earnings margin of 8%, as a result of prudent cost management. 1Q has always been the weakest quarter in terms of advertising expenditure (adex), and we expect the numbers to pick up in the following quarters. Overall Malaysian adex in 1QCY14 has been growing steadily (+14.7% y-o-y for overall adex,+7.9% y-o-y ex-Pay TV), which is a positive indicator for media companies.
• An overview of business divisions.Among its business divisions, TV, radio and digital media segments reported positive growth in both revenue and earnings, while print media and outdoor media segments reported contraction in revenue and earnings. Its future growth segment – content creation – recorded lower revenue, but it was able to report higher earnings due to more prudent cost management. (Please see Figure 1 for more details)
• 2014 outlook. Management is cautiously optimistic on adex growth in 2014, which will largely be supported by major sports events such as World Cup, the Asian Games and other sports events. We expect Media Prima to maintain its strategy to uphold its industry leadership position in traditional media platforms and drive its growth through continuous investment in quality and relevant contents, as well as in digital media.
• Maintain BUY. We like Media Prima for its solid foundation and its future growth engines like content creation and digital media, which are growing positively. We make no changes to our earnings forecast andwe maintain our BUY recommendation, with FV of MYR3.06 unchanged,based on 14x FY14F P/E, +1 SD of its historical mean. Its dividend yield remains attractive at >5%.

Source: RHB