Media Prima - Sailing Along

Media Prima (MPR)’s 9MFY12 earnings missed our expectation by a mere 4% but were in line with street estimates. The group’s 9M core profit ticked up marginally by  3%  y-o-y  given  the  moderate  2%  y-o-y  revenue  growth.  The  mediocre performance is attributable to the general market-wide slowdown in adex. We are trimming  our  FY12/FY13  earnings  forecasts  slightly  by  3%/2%  to  realign  our estimates to the company’s 9M financial performance. We  retain  our  NEUTRAL call  on  the  stock but  at a  lower  FV  of  RM2.39,  based  on  an  unchanged  13x  FY13 PE.

Missed our expectation, in line with consensus. MPR’s 9MFY12 earnings missed our expectation  by  a  mere  4%  but  were  in line with street estimates. The group’s 9M core profit  ticked  up  marginally  by  3%  y-o-y  given  the  moderate  growth  at  the  top  (revenue +2%  y-o-y).  The  mediocre  performance  is  attributable  to  the  general  market-wide slowdown  in  advertising  expenditure  (adex). On a quarterly basis, MPR’s revenue had contracted by 2% given the high base in 2Q – the Euro 2012, held in 2Q, attracted more advertisers vs the Olympics in 3Q. However, its bottom-line expanded to RM59.1m (+4% q-o-q), mainly driven by the decline in content cost related to Euro 2012 in the preceding quarter. Other takeaways were:

•   MPR’s television  segment  posted  a  9M  revenue/PAT  decline  of  1%/2%  y-o-y  toRM497m/RM95.8m  respectively.  Based  on  our  recent  adex  compilation,  we understand  that  its  FTA  TV  channels  garnered  weaker  advertising  income  –  TV3, NTV7 and 8TV saw a drop in 9M adex by 2%-8% y-o-y.

•   The  printing  division  registered  a  2%  y-o-y  9M  top-line  growth.  Harian  Metroimpressively chalked in strong advertising income of 15% y-o-y but this was diluted by  the  subpar  performance  of  both  Berita  Harian  and  New  Straits  Times  (slumped 3%-5%  y-o-y).  The division’s  PAT  shrank by  17%  y-o-y,  no  thanks  to  higher overhead costs.
  
  
  
•  The outdoor business recorded a robust 10%/7% y-o-y 9M  growth in revenue/PATgiven the increased contribution from expressway and digital media.  
  
  
•  A second interim dividend of 3 sen per share was declared, bringing its YTD payout to 6 sen/share.

Maintain NEUTRAL, FV revised to RM2.39. We are trimming our FY12/FY13 earnings forecasts  slightly  by 3%/2% to realign our estimates to the company’s 9M financial performance.  Our  NEUTRAL  recommendation  on  the  stock  is  retained  but  our  FV  is revised  down  to  RM2.39  based  on  an  unchanged  13x  FY13  PE.  We  are  cautious  on MPR’s exposure to the volatile TV segment given that advertisers are withholding their A&P spending in view of the uncertainties clouding both our domestic political scene as well as the current global economy.

Source: OSK