• NEUTRAL, new MYR0.41 TP from MYR0.43, 9% downside, c.3% FY24F (Jun) yield. Media Prima’s results missed expectations due to challenging advertising landscape. Despite the sequential uplift in advertising expenditure (adex) during the quarter, we remain cognisant on MPR’s mid- term prospects, considering the macroeconomic headwinds and dampened retail sentiment. As the stock’s valuation is slightly ahead of the historical 5- year P/BV mean, we deem the risk-reward profile as largely balanced.

• Results review. 2QFY24 core earnings of MYR8.9m (526% QoQ, -18.2%YoY) brought the 1HFY24F core earnings to MYR10.3m, making up only 27% and 32% of FY24 estimates. The deviation was primarily attributed to lower-than-expected adex, Wowshop, and content sales. EBIT margin narrowed c.3%, driven by higher depreciation and lower margin from Omnia (centralised advertising arm). QoQ, revenue grew 5% due to the year-end festive season that boosted adex sales (7% QoQ). Sequential core earnings improved more than five-fold, mainly due to lower impairment write-offs.

• 2QFY24 adex sales of MYR187.6m was as key contributor (88% of total revenue) despite a 7.6% YoY drop, reflecting a prolonged subdued market sentiment. While the broadcasting segment recorded an 80% drop (after excluding inter-segment revenue), PAT increased 118.6%, due to better margin resulting from improved cost management, in our view. Positively, outdoor advertising (OOH) revenue was up 65.7% YoY, benefitting from increased demand. We anticipate that MPR will continue to leverage this trend by transitioning static billboards to digital formats.

• Wowshop sales continued to be a key drag, and remained in a deficit. The pivot to Tiktok shop and the promotion of its in-house branded products will require more time to see the benefits, as e-commerce competition remains stiff alongside the high inflationary environment. We maintain a cautious stance on management’s execution of the three growth pillars – content boost, inventory premiumisation, and exploration of new revenue streams, given the fast-changing and demanding market conditions.

• Forecasts moderated. Following the earnings miss, we cut FY24-26F core earnings by 15-42% after lowering our revenue and margin assumptions. Our TP is lowered to MYR0.43 post earning adjustment, and pegged to a blended 0.6x P/BV and 11x FY25F EPS, with a 4% ESG premium incorporated.

• ESG. We lift our ESG score to 3.2, given the group's improving disclosures, which include full Scope 1-3 disclosures from FY24F, the renewed commitment in advancing its social agenda, and being a key advocate of the ongoing humanitarian crisis. Key risks include stronger/weaker-than- expected advertising spend and non-advertising income growth.

Source: RHB Research - 29 Feb 2024