Media Prima - TV to drive FY12F earnings BUY

We re-iterate our BUY rating on Media Prima (MPrima) with a higher DCF-based fair value of RM3.10/share, vs. RM3.03/share previously. Our implied forward PE of 13x is well within the stock’s PE band of 13x-15x.

• MPrima posted a core net profit of RM205mil for FY11, which came in above our expectations. FY11 earnings was 10% ahead of our forecast and by 6% above consensus – the positive variance owing to stronger-than-expected adex volume in 4Q. 

• Management has proposed a final single-tier dividend of 5 sen, bringing total dividends to 13 sen/share for this quarter (inclusive of a single-tiered 2nd interim of 3 sen and a special 5 sen declared in November 2011). FY11 dividends of 16 sen/share translate into a generous payout of 80% – 6 sen higher than our DPS forecast.

• The group recorded solid earnings for 4Q which rose 36% QoQ to RM73mil, despite a marginal 2% increase in turnover. The improved performance was attributed largely to:- 1) Accelerated adex spending in the final quarter as advertisers exhausted their ad-budgets and; 2) A 4ppt- EBITDA margin boost from better cost management.

• On a YoY basis, turnover increased 5% mainly on the back of higher revenues from TV and print, which grew 5% each, and outdoor division at 10%. Stripping out EIs of RM54mil (largely owing to negative goodwill from acquisition of NSTP), FY11 core net profit was up 9% from the preceding year.

• Management has guided for increased content costs for FY13F, as the group invests in more local contents  and quality TV programmes to ensure viewership market share (FY11: +1ppt to 47%). Performance of the print division remains healthy via Harian Metro paper, in tandem with growing Malay language adex that grew 5ppts to 31%  in 2011. 

• The performance of radio stations, which was affected by stiff competition, should see some improvement moving forward with the launching of HotTerengganu and HotKelantan radio stations soon. Outdoor media which saw flat growth should rebound over next few quarters given the tail-end of its gestation period following outdoor  media acquisitions.

• All in, we have raised our earnings forecast for FY12F-13F by 3%-4%, post the group’s full-year figures. No change to our industry adex growth forecast of 8%-9% for 2012-13. Adfriendly special world events such as the Euro Cup 2012 and London Olympics this year are expected to boost adex spending, with further upside arising from a potential snap general election.  


Source: AmeSecurities