We downgrade Media Prima to SELL (from  Neutral) and trim our  TP to MYR1.66  from  MYR2.10  (13.1%  downside,  10.4x  FY15F  P/E).  9M14 earnings  came  in  weaker  than  expected  due  to  weak  consumer sentiment,  which  was  further  compounded  by  plane  crash  tragedies. Advertisers are withholding their adex budgets. Media Prima declared  a second interim dividend of MYR0.03 (YTD FY14 MYR0.06) in 3Q14. 

Below expectations.  Media Prima’s 9M14 results came in weaker thanexpected,  with  net  profit  of  MYR105m  (-30.3%  YoY)  making  up  only 55%/58% of  our/consensus  estimates. All its business divisions  reported declines  in pre-tax profit  contributions, including  the free-to-air (FTA)  TV segment (-34% YoY),  the radio segment (-10% YoY), the outdoor m edia segment (-13% YoY) and the print m edia segment (-61% YoY). Its digital segment  reported  a  narrower  pre-tax  loss  of  MYR3.4m,  a  slight improvement from a pre-tax loss of MYR4.3m in 9MFY13.

Subpar  adex  growth;  more  discounts  given.  Management  indicated that its 9M14 adex revenue had  contracted by 11% YoY. We  also  notedthat the discount  factor  given  by  the  FTA TV segment  was  higher  thanlast year  (71% in 9M14 vs 67% in 9M13),  indicating  that  the operating environment is getting more challenging. We believe this was mainly due to weak consumer sentiment  arising from higher living cost, which wasfurther  compounded by two plane  crash incidents  of  MH370 and MH17.Advertisers are becoming more cautious and holding back on advertising spending.  Moreover,  the  absence  of  one-off  campaigns  from  nontraditional advertisers also contributed to the decline in adex revenue.

Earnings  cut.  We  revise  our  earnings  model  and  cut  our  FY14/FY15forecasts  by  21%/20%  respectively,  factoring  in  a  much  more challenging operating environment for Media Prima.   Downgrade  to  SELL.  We  roll  over  our  valuation  to  10.4x  FY15F  P/E (from  FY14F),  which  is  -0.5SD  from  its  historical  trading  band (maintained).  Following  our  earnings  revision,  we  trim  our  TP  to MYR1.66  (from  MYR2.10),  implying  a  13.1%  downside.  Downgrade  to SELL (from Neutral).

Source: RHB