• NEUTRAL, new MYR0.45 TP from MYR0.41, 3% downside, c.3% FY24F (Jun) yield. Media Prima’s results were a miss due to an advertising expenditure (adex) shortfall. While there was a sequential drop on seasonality, its performance improved YoY on strategic cost initiatives. We remain cautiously optimistic on a stronger earnings recovery in 2HCY24. We deem MPR’s risk-reward as largely balanced, with valuation on par to the historical 5-year P/BV mean.

• Results underwhelm. 3QFY24 core earnings of MYR1.9m brought 9MFY24 core earnings to MYR13m or 59% and 43% of our and Street’s full-year estimates. This deviation was mainly on lower-than-expected adex earnings. YoY, adex sales improved by 7%, primarily attributed to better outdoor advertising or OOH (+45% YoY). This was offset by the 60% and 12% YoY declines in content and home shopping sales. EBITDA margin expanded c.1% on lower operating costs. As a result, core profit was in the black (1QCY23: -MYR11.7m) on better cost management. On a quarterly basis, revenue fell by 5% off a higher 2QFY24 (boosted by the year-end festive season).

• Segmental review. While the broadcasting segment recorded a 41% YoY drop (after excluding inter-segment revenue), PAT increased >10x to MYR3.5m (1QCY23: MYR0.3m) on better margins resulting from improved operational efficiency, in our view. Home shopping sales surprised on the upside (+12% QoQ) and a narrower loss of MYR2.7m (2QFY24: -MYR3.4m), supported by Lunar New Year and Aidil Fitri sales. Although the pivot to TikTok Shop may take longer to bear fruit, we are slightly more positive on the venture, with a >15% increase in followers on the platform to drive sales from the younger demographic. OOH topline was up 45% YoY (-1% QoQ), benefitting from increased demand for digital billboards, which reflects the consumer spending recovery. We think MPR will upgrade more static billboards to digital variants to leverage on the OOH uptrend. Hence, we keep our view of a mild recovery in earnings, driven by continued growth in the OOH segment and cost optimisation efforts.

• We cut FY24F-26F earnings by 16-28% after adjusting our revenue assumptions. While it will take time for MPR to rebound, we believe it is poised to recover from FY23’s lows. We nudge our TP higher to MYR0.45, now based on a blended 0.7x P/BV from 0.6x and 14x FY25F EPS from 11x. The 14x target P/E is now on a lower discount to our house target P/E to reflect the better market sentiment and stronger market recovery, for which MPR is a strong proxy. This is also aligned with our economics team’s projection of stronger 2024 GDP growth of 4.6%. Our TP incorporates a 4% ESG premium given MPR’s 3.2 ESG score. Key upside/downside risks: Stronger-/weaker-than-expected advertising spend and non-advertising income growth/drops.

Source: RHB Securities Research - 30 May 2024