Media Prima - Bleak Macro Outlook

Media  Prima  (MPR)’s  FY12  earnings  beat  our  estimates,  with  record  retained earnings  of  RM9.7m  from  accumulated  losses  previously.  We  think  the  operating environment for media companies remains challenging and we expect to see a pick-up  in  adex possibly  only  in  2HFY13.  That  said,  we  are  bumping  our  FY13/FY14 earnings forecasts upwards by 14.0%/26.2% respectively, as we may have been too conservative  earlier.  Given  concerns  over  the  macro  outlook,  we  lower  our  FV  to RM2.20 (RM2.29 previously) which is now pegged to 11x FY13f PE (from 13x).  

Beat our estimates. MPR’s FY12 net profit of RM209.3m beat our and street’s estimates. On a quarterly basis, the group’s revenue climbed 11% on the back of an increase in adex in  the  final  quarter  of  the  year,  fuelled  by  festive  season  and  school  reopening  sales,  as well as adex by the Non Traditional Advertisers (NTAs). Other takeaways were:

• MPR’s TV segment posted full-year FY12 revenue/PAT growth of 4%/7% y-o-y toRM890.8m/RM155.9m  respectively.  Its  four  FTA  TV  channels  continued  to dominate the FTA TV market, as MPR remained driven  in content investment to attract advertisers.
• The group’s printing division registered a 3.9% y-o-y full-year top-line growth, withits  print  adex  outperforming  that  of  the  industry  (+9.0%  vs  -1.0%),  mainly  driven by  the  growing  Malay  language  paper  market.  EBITDA  for  the  division  also improved  7.3%  y-o-y  on  higher  revenue,  which  offset  the  increment  in  human resource costs.
• Its outdoor business was affected by the relocation of its advertisement boards togive  way  to  MRT  construction  as  well  as  PLUS  Highway’s road widening work. Consequently,  MPR  incurred  higher  costs  which  impacted  both  its  EBITDA/PAT margin (-2%/-1%).
• Management  highlighted  that  MPR  is  ready  to  tap  into  the  fast-growing  digitalmedia market when the time is right.
• The group had RM9.7m in retained earnings as at 31 December 2012.  
• MPR  declared  a  final  single-tier  dividend  of  7.0  sen  per  share,  bringing  its  YTDpayout to 13.0 sen/share.

Market  remains  challenging.  After  recording  a  lackluster  adex  growth  2%  in  2012,  we think the adex growth outlook for 2013 may not be too encouraging due to uncertainties in the global economic recovery and the local political conditions, which may lead to cautious spending by advertisers. We believe any positive progression in adex may only come in by 2H2013,  when  conditions  on  the  global  and  domestic  fronts  become  more  stable  and advertisers may be more willing to spend on their budgets.

Maintain NEUTRAL with RM2.20 FV. Despite a challenging operating environment, MPR has  managed  to  capture  the  Malay-language  media  market,  in  which  we  believe  there  is still room to grow. Also, MPR’s improved financial position has proven that the company is moving on the right track. Therefore, we are revising our FY13f/FY14f earnings upwards by 14.0% and 26.2%  respectively,  as  we  may  have  been  too conservative  earlier.  However, we  prefer  to  remain  prudent  and  stay  cautious  on  the  development  of  the  industry.  Thus we  are  maintaining  our  NEUTRAL  call  on  MPR,  with  our  new  RM2.20  FV  based  on  11x FY13f PER (from 13x previously) to reflect our concerns on the macro outlook. 

Source: OSK