Media Prima - Better 2H seen on back of events, festivities Buy

-  We re-affirm our BUY recommendation on Media Prima (MPrima), with an unchanged fair value of RM2.90/share based on a 10% discount to our DCF value. The stock currently trades at a 13x PE on FY12F earnings, within its historical PE band of 10x-15x.

-  MPrima reported earnings of RM57mil for 2QFY12, which brought the 1HFY12 total to RM78mil. This accounts for 37% and 40% of our and consensus estimates. We deem the result to be within expectations as advertising spend had picked up in 2Q and this, we believe, is bound to gain a stronger momentum, particularly in the second half of the year. An interim dividend of 3.0sen/share was declared, representing a yield of 1.2%.

-  YoY, 1HFY12 earnings slipped by a marginal 2% due to low advertising spend in 1Q, while revenue rose 0.9% from strong recovery in 2Q. 

-  QoQ, 2Q earnings rose significantly by 173%, in tandem with a 34% revenue increase, mainly driven by:- (1) higher advertising revenue arising from the Euro 2012 soccer championship; and (2) several revenue activation since April (i.e.: targeting non-traditional advertisers via promotional bundles). Revenue growth across platform – TV, radio, outdoor media and radio – showed improvement. The core platforms, TV and print, contributed 41% and 45% in revenue, respectively.

-  Outdoor media commanded a 44% market share – the largest in the industry. Earnings grew by 7% backed by an 11% rise in revenue, underpinned by new sites and higher demand for advertising space. It has recently launched digital advertising and has been awarded the concession for the bridge between KL Convention Centre and Pavilion Mall.  

-  Given the foreseeable continued advertising trend springing from upcoming events and festive season (i.e.: London Olympics, Hari Raya Adilfitri, Merdeka, Christmas), we expect MPrima’s advertising revenue to be encouraging for the second half of the year. In such times, consumer spending tends to rise which is a good time for advertisers to capture the audience’s attention coupled with a seasonally robust 4Q.

-  With its competitive advantage of content creation, it has effectively minimised cost by managing local and foreign syndicated content as well as repeating selective popular and highly-rated content. Additionally, MPrima has implemented promotion strategies through cross promotions between platforms and channels as well as between slots and cluster promotions to boost viewership, readership and listenership.

-  Moving forward, MPrima will continuously invest in quality and relevant content to grow earnings and to maintain its leadership position in the market. Currently, advertising revenue contributes circa 85%. Management intends to reduce this dependency by having 20%-30% of non-advertising revenue via content (ie: supply and produce content for third party) within 3-5 years’ time. 

-  Being the best proxy and strong brand name in Malaysia, we remain bullish on MPrima premised on:- (1) fully-diversified media platform;  (2) dominant position in the Malay-language print segment; and (3) virtual monopoly in the FTA TV segment with lion share of 80%. 

Source: AmeSecurities