Review

• Media Prima’s reported 1QFY24 net profit of RM14.1mn (+59.2% QoQ, +96.2% YoY) was lifted by one-off items including: i) net reversal of impairment of financial instruments (RM6.4mn), ii) gain on disposal of investment properties (RM3.7mn), and iii) insurance claims received (RM2.2mn). Excluding the exceptional items, core net profit of RM4.7mn (-70.0% QoQ, -35.1% YoY) came within ours but below consensus fullyear estimates at 22.0% and 12.8% respectively.

• 1QFY24’s core net profit dipped 70.0% QoQ and 35.1% YoY to RM4.7mn as revenue fell 4.1% QoQ and 9.8% YoY to RM213.9mn. The decline in revenue was mainly due to lower non-advertising revenue from the broadcasting segment and continued weakness from the home shopping segment. Meanwhile, advertising revenue (+0.1% QoQ, -0.4% YoY) was subdued amid economic uncertainties.

• Media Prima maintained a robust balance sheet with a net cash position of RM154.1mn or 13.9sen/share (-16.4% QoQ, -3.9% YoY).

Impact

• Our FY24F to FY26F earnings forecasts are revised marginally by +0.3% to +0.6% as we impute FY23 audited figures into our model.

Outlook

• The group remains cautious in the near term, with ongoing economic uncertainties posing downside risk to Adex and consumer sentiment. That said, we expect sequentially stronger performance in 2QFY24, with adex typically observed to pick up amid year-end festivities.

• On a brighter note, management had earlier acknowledged that the subdued adex is unlikely structural. From communication with advertisers, management gathered that spending is only being held back transitorily until macroeconomic conditions improve.

• To that end, Media Prima remains guided by its 3-year business plan to drive long-term sustainable growth. Leveraging on its strength as an integrated media group, the plan is focused on three key pillars, including: i) enhancing content, ii) inventory premiumisation, and iii) exploration of new revenue streams.

Valuation & Recommendation

• Corresponding to our earnings revision, our TP for Media Prima is revised slightly higher to RM0.38 (previously RM0.37) based on P/BV of 0.6x CY24F BV. However, we maintain our Sell recommendation on the stock as its risk-reward potential remains unfavourable. We view stronger-than-expected adex as a key rerating catalyst for the stock.

Source: TA Research - 30 Nov 2023