• Keep BUY, new MYR0.87 TP from MYR0.90, 61% upside. Media Prima’s results were light against our and market expectations, with the publishing and home segment in the red. We see a much stronger 2Q22, with travel restrictions uplifted and the ramping up of economic activities. The group will look to revamp its e-commerce platform to increase revenue from its non-advertising segment. Our TP has baked in a 2% ESG premium based on our in-house methodology.

• Seasonally weak. With advertising expenditure (adex) being seasonally lower in the first quarter (-26% QoQ, +15% YoY), MPR’s core earnings dived 87% QoQ but improved 15.9% YoY – this was partly contributed by lower depreciation and amortisation. Overall, results were slightly below expectations at 7% and 8% of our and Street’s estimates. Despite most segments booking YoY revenue increases in line with the improved adex environment, earnings were dragged down by the home shopping segment. The latter recorded a MYR4.2m loss during the quarter, as consumers returned to brick-and-mortar stores. Normalised EBITDA dropped slightly YoY by 2%.

• Adex growth benefitting most segments. Omnia, the group’s integrated adex platform, saw a 33% YoY revenue increase. This was as advertising increased across its platforms, as well as the consolidation of the out-of- home advertising sales arm from the 2H21. Broadcasting and digital media segments also saw encouraging YoY growth, with revenue increasing 28% and 22%, while the out-of-home segment saw a gradual increase in demand for out-of-home advertising – a 13% increase in revenue YoY. Moving forward, we think the adex recovery will continue to be strong. Additionally, a general election will be an upside to the industry, as election years typically create more advertising space demand.

• WOWSHOP continues to struggle. Revenue contributions from WOWSHOP continues to decline (-16% QoQ, -44% YoY) since its peak in 2Q20, as shoppers return to physical/retail outlets – this resulted in a MYR4.6m LAT during the quarter. MPR’s plan to reposition the segment is underway by revamping its e-commerce abilities and working closely with Omnia to provide solutions for SMEs. Management previously guided that it intended WOWSHOP to move away from being a pure home shopping platform and offer more items moving forward.

• Forecast and outlook. Post results, we lower our FY22F-24F earnings by 5% to account for the net profit miss. We remain positive on the outlook for MPR as Malaysia transitions into an endemic phase while international borders have been reopened since 1 Apr. Key risks: Change in adex sentiment, an economic slowdown, and execution.

Source: RHB Research - 31 May 2022