Media Prima Bhd
(May 30, RM1.06)
Downgrade to underperform with a lower target price of 90 sen: Media Prima Bhd reported first quarter of financial year 2017 (1QFY17) revenue of RM272.2 million (down 10.5% year-on-year [y-o-y], down 14.6% quarter-on-quarter) and a net loss of RM38.5 million (versus RM17.2 million in 1QFY16).
The results were below expectations. The poor set of results was due to losses incurred on its traditional platforms, namely the television (TV) segment (RM23 million) and print segment (RM17 million), on the back of prolonged weak advertising expenditure (adex) sentiment, lower advertising and circulation income as well as higher operating costs for its new initiatives.
Given the anticipation of weaker advertising and circulation income and the conclusion of major advertising clients’ annual commitment agreement, we slash our FY17 to FY19 core earnings forecasts by 12% to 30%. No dividend was declared for the quarter.
Media Prima’s 1QFY17 revenue was dragged down by the TV segment (down 23.1% y-o-y) and print segment (down 25.4% y-o-y). Free-to-air TV remained pressured by weak adex sentiment.
The drop in print revenue was largely due to lower advertising and circulation revenues which contracted by 21% and 29% y-o-y respectively. The TV and print segments remained the largest revenue contributors, which accounted for 39.2% and 30.2% of Media Prima’s 1QFY17 revenue respectively.
Media Prima reported a net loss of RM38.5 million in 1QFY17, compared to a profit of RM17.2 million in 1QFY16. Lower advertising revenue and higher operating costs for the digital business initiatives dragged down the TV segment into a loss of RM23 million.
Meanwhile, the print segment recorded a loss of RM17 million as a result of a prolonged declining trend in advertising revenue and newspaper sales. In its gestation phase, the home shopping segment recorded a loss of RM4.2 million.
In addition, profit after tax (PAT) for all of its other segments, including radio, outdoor media, digital media and content creation segments, dropped by 44.1%, 2.9%, 62.5% and 57.5% y-o-y respectively.
Despite a 2.9% drop in PAT due to start-up costs for the new mass rapid transit concession operations, the outdoor media segment remained stable, contributing the biggest portion (RM7.2 million) among all segments to the group’s bottom line in 1QFY17.
Going forward, the new business initiatives implemented to diversify its revenue portfolio are expected to remain in gestation in the near term. Apart from the start-up losses and long gestation phase, we are also concerned about the fact that several major advertising clients of Media Prima have concluded their annual commitment agreement for 2017 on the TV platform.
All in, we cut our FY17 to FY18 core earnings forecasts by 12% to 30% to factor in weaker advertising and circulation income. — PublicInvest Research, May 30