Media Prima’s 9M15 results were in-line with expectations, making up 72.9%/73.4% of ours and consensus estimate. Revenue contracted on the back of weaker advertising spend but earnings were supported bycost savings measures. Maintain NEUTRAL with a revised TP of MYR1.37 (from MYR1.21, 2% upside).

9M15 earnings typically make up between 70-74% of full-year earnings; results were in-line, making up 72.9%/73.4% of ours and consensus estimate. Revenue contracted 5.5% YoY, led by a 4% contraction in advertising spend (adex) and a 15% contraction in circulation revenue;earnings improved 2% YoY due to cost-savings measures.

Segmental breakdown. Media Prima recorded YoY improvement in 9M earnings across all of its business segments except in free-to-air (FTA) TV segment which recorded a contraction of 2.4% YoY due to weaker adex revenue. Notable improvements include print media segment (+16.2% YoY) as well as content creation (+52.9% YoY), where the former benefited from continuous cost management while the latter enjoyed higher content sales to Primeworks Distribution.

Outlook. Media Prima expects a tough business environment for the remaining of 2015 on top of the challenge of a gradual shift in consumer preference away from traditional media and towards digital. Management continues to reiterate its effort in managing the costs in light of weaker adex market as well as diversifying non-traditional revenue (content creation & digital media). Media Prima declared an interim 2 sen dividend; we forecast FY15 dividends between 9-10 sen, which would represent a yield of around 7%.

Maintain NEUTRAL. We make no changes to our earnings forecast androll forward our valuation to FY16. While we are impressed with Media Prima’s cost saving measures, we remain cautious on the broader adex market due to a weak consumer sentiment. As such, we revise our TP to MYR1.37 (2% upside), pegged to an unchanged FY16F 9.6x P/E which is -2SD from its historical trading band. We opine that earnings are susceptible to downside risk as consumer sentiment remains challenging, noting the recent price hikes in tolls, public transportation fares as well as cigarettes prices. Our corroborative valuation (see Figure 4) of enterprise value to invested capital (EV/IC) supports our TP.