Media Prima - Sport events, GE to boost adex growth ahead BUY

-  We re-affirm our BUY rating on Media Prima (MPrima) and our fair value of RM3.10/share based on a 10% discount to our DCF valuation. Our implied PE of 12x for FY12F is well within its historical PE band of 9x-15x.

-  The first quarter started off slow for MPrima, where earnings came in at RM22mil – a contraction of 39% YoY and 71% QoQ – constituting only 10% and 11% of our and consensus estimates. 

-  This was largely due to the seasonality effect, coupled with volatile global economic conditions; thus, lack of confidence of advertisers to commit on ad spends.

-  MPrima experienced a 5.3% revenue contraction YoY, mainly attributed to the TV segment (-19% YoY). However, the decline in the TV segment was mitigated by the continued growth in print, radio, outdoor and new media segment.

-  Typically, the first quarter tends to be the slowest quarter when advertisers are cautious, leading to a hold back of budgets and adopts the wait-and-see approach. Advertisers usually have exhausted their ad budgets in the 4Q due to the festive season (-22% QoQ). 

-  Nevertheless, ad spending is expected to pick up in the 2Q and 3Q as advertisers are looking at spending more in their marketing efforts.  Moreover, major sporting events such as the 2012 European Cup, London Olympics, and the 13^th  General Election are likely to boost ad spend. 

-  Although annualised earnings were below our and consensus estimates, we expect a stronger ad spend moving forward, which would largely contribute to a stronger 2Q and 3Q. More importantly, ad spend would also be lifted by the recovering adex sentiment. Hence, the 1Q results are still within expectations.

-  Despite an overall industry contraction of print by 1%, MPrima’s print adex continues to grow (+7% YoY), which is driven by the growth in the Malay language print segment underpinned by an expanding readership base. 

-  Performance of radio stations grew by 4% YoY, mainly contributed by higher revenue generated by One FM.  The recent launch of HotFM Kelantan and HotFMTerengganu has allowed MPrima to expand its regional presence in the East Coast market; radio adex reached the RM8mil mark last year.

-  Outdoor media, which saw a flat growth previously, rebounded with a revenue growth by 12% YoY, stemming from renewals and new big ticket customers following the grant of concession right for some new sites last year.

-  All in, we continue to like MPrima for its diversified range of media and monopoly in the FTA TV segment. Our earnings forecasts for FY12FFY14F remain unchanged, pending a meeting with management. No change to our industry adex growth forecast of 8%-9% for FY12 and FY13, respectively .

Source: AmeSecurites