• BUY, new MYR0.57 TP from MYR0.59, 28% upside. Media Prima’s results were below estimates, as the stronger YoY advertising revenue was offset by lower non-advertising revenue – particularly from the struggling home shopping segment. Despite the challenging environment, MPR continues to record quarterly profits, thanks to cost management initiatives and revision of its revenue models in recent years. Our TP is pegged to 0.6x FY24F P/BV historical mean and 11x FY24 EPS (2% ESG premium imputed).

• Results missed expectations. 3Q22 core earnings of MYR7.2m (-54.7% QoQ, -6.1% YoY) brought 9M22 earnings to MYR29m (+10.3% YoY). This is below estimates at just 48% and 55% of our and Street’s estimates, notwithstanding the stronger 4Q ahead. Advertising expenditure (adex) revenue declined by 11% QoQ (+4% YoY) off a higher base in 2Q22, which was supported by the Aidil Fitri festivities, while the home shopping segment continues its struggle with revenue falling 22% QoQ (-50% YoY) as shoppers return to physical retail outlets and turn more cautious amid the inflationary environment. On a YTD basis, EBIT margin improved to 8.7% from 6.8% on lower operating expenses.

• Advertising revenue and content sales the main drivers. In 9M22, total adex (73% of total revenue) grew 7% YoY driven by Omnia, its integrated advertising solutions platform, as a sign of the positive adex momentum since the economic reopening. Content sales grew 58% YoY from the increase in demand for local content from streaming service providers. However, the home shopping segment continues to drag down earnings, with revenue falling 46% YoY and recording a LAT of MYR15.2m YTD. While the publishing segment saw lower revenue (-6.7% YoY), it remained profitable with a PAT of MYR0.35m (9M21: MYR0.53m).

• Outlook. MPR should end the year on a high note from the seasonally strong 4Q, driven by higher adex from the festive season and events such as the FIFA World Cup. Content sales should also continue to grow with MPR entering into a collaboration with Hunan Broadcasting System, one of China’s leading television networks, to co-produce programmes on 8TV. However, we are cautious on the adex momentum in the upcoming year if inflation remains elevated, considering MPR’s heavy reliance on adex.

• Maintain BUY. With MPR having changed its financial year-end to June, we now expect the 18-month fiscal year period to report earnings of MYR82m after lowering our annualised earnings forecast by 10%, and our FY24 numbers by 11%. We also introduce our FY25 estimate of MYR74m. Key risks: Sharper-than-expected drop in ad spending and weaker-than- expected earnings.

Source: RHB Research - 30 Nov 2022