Review

• Media Prima’s reported 1QFY25 core net profit of RM0.5mn, came below ours and consensus full-year estimates at 0.7% and 1.2% respectively. The negative variance was attributed to lower-than-expected margins on the back of higher-than-expected costs.

• YoY. 1QFY25 revenue fell -8.9% YoY to RM194.9mn, impacted by weaker performance across all segments except “Corporate and Others,” as challenging market conditions persisted. Reflecting the lower sales, core net profit for the quarter plunged to RM0.5mn (-90.1% YoY), largely due to reduced operational efficiencies, particularly in the Broadcasting segment (PAT margin compressed from 9.8% to 1.9%) and Publishing segment (PAT margin declined from 39.8% to 12.0%).

• QoQ. 1QFY25 revenue increased slightly by 0.9% QoQ mainly due to higher advertising revenue in the current quarter. Similarly to YoY, core net profit plunged 98.0% QoQ on the back of higher-than-expected costs.

• Media Prima maintained a robust balance sheet with a net cash position of RM165.9mn or 15.0sen/share (+2.4% QoQ, +7.7% YoY).

Impact

• We have cut our earnings forecasts for FY25/FY26/FY27 by 60.5%/ 61.9%/67.0%, respectively as we i) raised cost assumptions to reflect actual 1QFY25 results, ii) conservatively lowered adex in FY25/FY26/FY27 to reflect the anaemic adex outlook.

Outlook

• Recent data from Nielsen Media Research indicates that 3QCY24 industry adex declined to RM1,277.0mn (-1.3% YoY), slightly above the 5- year average of RM1,229.0mn. September adex was RM420.0mn, falling below the 3-year average of RM432.0mn. Nonetheless, we anticipate adex to stabilize near historical averages, with potential upside as boycott effects wane and ad spending recovers.

• According to management, the current adex softness is not structural. Advertisers have indicated that the spending pullback is temporary and expected to recover as macroeconomic conditions improve.

• Media Prima remains focused on its 3-year business plan to drive sustainable growth. As an integrated media group, it aims to attract more clients through enhanced content offerings and upgraded digital billboards, which provide better pricing power. These initiatives position Media Prima to stay competitive and support revenue improvement in the long term.

Valuation & Recommendation

• Corresponding to our revision in our net profit forecast and outlook, our TP for Media Prima has been revised lower to RM0.40 (previously RM0.46) based on P/BV of 0.6x (previously 0.7x) CY25F BV with an ESG Premium of 3%. We maintain our Sell recommendation on the stock as its risk-reward potential remains unfavourable. We view stronger-thanexpected adex and stable and higher top-line margins as key rerating catalysts for the stock.

Source: TA Research - 28 Nov 2024