Media Prima - Let Down by FTA TV

Media Prima’s (MPR) 1QFY12 revenue of RM335m was within our and consensus estimates  but  the  core earnings of RM21m  fell short, representing only 8% and 11% of  both numbers. This was  no surprise, owing to seasonality. Nonetheless, we are cutting our revenue and earnings projections by 2%-9% for FY12 and 3%-11% for FY13 to reflect our more  conservative stance. We are maintaining our BUY rating on MPR, with our new FV of RM2.98 (RM3.01 previously), pegged at a lower FY12 PER of 14.5x (5-year average PER) vs 16x previously, due to the weak economic sentiment. The upcoming global and domestic events, expansion of the company’s content creation and recent ruling on content sharing of sports events between pay and FTA TV operators, are the key catalysts.

TV down, as expected. MPR’s 1QFY12 revenue and core earnings dropped 22% and 72% q-o-q while y-o-y these numbers were down  5% and 40% respectively. As  we highlighted in our 23 Apr 2012 sector report, “All’s Well Within Expectations”, we deem the results within our projection owing to seasonal factors as advertisers tend to be more skeptical in 1Q, and adopt a wait-and-see attitude while finalizing their advertising budgets. Besides, advertisers had also brought forward most of their advertising spending (adspend) to Dec 2011  since  Chinese New Year (CNY)  fell  in January this year. As such,  revenue in  MPR’s  TV segment was down 39% q-o-q and 19% y-o-y. Nevertheless, the group’s FTA TV held on to its lion’s share of adex at 46%, justifying our positive view on its TV segment going forward in view of the upcoming major events and the highly anticipated General Election, which may be held in 2HFY12. In addition, should the outcome of negotiations between the pay- and FTA-TV operators be positive, MPR will reap the benefits in the mid- to long-term.

But other platforms in the pink of health. MPR’s newspaper, radio and outdoor media segments grew  by a robust  2%, 10% and 16% y-o-y respectively. Its flagship publication, Harian Metro (+10% adex y-o-y), remained the group’s mainstay, in line with our view of its growing readership and MPR’s success in implementing its segmentized approach.  These led to advertising revenue  rising  7% y-o-y. Meanwhile, we see huge potential for the group’s  radio segment,  stemming  from the  successful launch of HOT FM Kelate and HOT FM Terengganu early this year, which boosted its nationwide HOT FM listenership by 4% y-o-y while its Chinese radio station, One FM, posted a 21% y-o-y and 46% improvement in revenue. Meanwhile, outdoor media revenue also experienced robust growth, buoyed by the  renewal of contracts from existing clients as well as contracts from new clients.

Source: OSK