• Maintain NEUTRAL, new MYR0.45 TP from MYR0.49, 8% upside with c.5% FY24F (Jun) yield. Media Prima’s 5QFY23 results are well short of our and consensus expectations, as it booked its first quarterly core net loss since 2QFY20 (FYE Dec). Revenue fell across all segments YoY, amidst the challenging business environment and softer advertising market conditions. While we slash our earnings estimates for the current financial year, we remain optimistic on the group’s longer-term outlook, as it continues to embark on its turnaround plan.

• Results review. Stripping out a MYR13.4m one-off gain from the disposal of New Straits Times Properties’ industrial land, MPR recorded a core net loss of MYR9.5m for 5QFY23 – marking its first quarterly loss since 2QFY20 (FYE Dec). This is well below expectations, at 49% and 45% of our and Street 18-month estimates. The surprise came from its lowest ever quarterly revenue – at just MYR210.8m (-16.6% QoQ, -14.8% YoY) – as the group struggled to navigate the challenging business environment. It remains heavily dependent on adex, which accounted for 77% of total revenue for the quarter.

• All segments struggled. 4QFY23 adex revenue dropped by 6.8% YoY due to the soft advertising market conditions, and content sales were 41.9% lower YoY, as the group sold more titles in 1QFY23. WOWSHOP continues to slip, with revenue down 39.5% YoY (-8.1% QoQ) as the group’s plan to turn the business around from a pure marketplace to one that leverages the rest of the group’s media platforms requires time to bear fruit. Newspaper sales followed the trend, with revenue declining by 9.4% YoY (-6.4% QoQ).

• Earnings cut. Following the results, we cut our FY23F (18 months) earnings by 31%, but make smaller adjustments to FY24-25F numbers by -9 to -10% after factoring in slower topline growth and more conservative margin assumptions. As this is a seasonally slower quarter, and earnings have fluctuated widely on a QoQ basis, we remain optimistic on MPR’s long- term outlook. The group is focused on growing its non-advertising revenue, such as by monetising its large content library via Tonton – repositioning it as a hub for MPR’s best content. With its valuation in line with the historical P/BV mean, the risk-reward profile looks balanced. Upside/downside risks include stronger/weaker-than-expected advertising spend and non- advertising income growth.

• ESG framework update. As there is now a greater focus on the E pillar due to critical climate change issues, we have tweaked our ESG weightage. Henceforth, we assign a weightage of 50% to the E pillar, followed by 25% each to the S and G pillars. Further details are in our 2 May thematic research note titled Envisioning a Better Future.

Source: RHB Research - 25 May 2023