This article first appeared in The Edge Financial Daily on May 30, 2018
Media Prima Bhd
(May 28, 40 sen)
Maintain reduce with a lower target price (TP) of 25 sen: Media Prima Bhd posted a core net loss of RM20.7 million in first quarter of 2018 (1QFY18), albeit 46.2% narrower year-on-year (y-o-y) following its impairment exercises in financial year 2017 (FY17). It was the television segment that kept the group in the red, as its revenue declined 15.2% y-o-y. The nature of the segment’s high operating leverage resulted in its 1QFY18 loss after tax widening by 51% y-o-y to RM34.7 million. This cancelled out the other segments’ aggregate profit after tax of RM11.7 million in 1QFY18 (1QFY17: loss after tax of RM18.3 million).
Two healthy trends that emerged in 1QFY18 are the first quarterly y-o-y revenue growth since 3QFY13 (1QFY18 growth: 3.1%) and a commendable 27.6% y-o-y decrease in depreciation and amortisation charges, thanks to the kitchen-sinking exercises in FY17. The revenue uptick came from new businesses, home shopping and digital, which maintained their y-o-y exponential growth momentum. The home shopping segment’s revenue surged 59% y-o-y, driven by growing sales from both online and mobile channels.
Its 98.2%-owned subsidiary — The New Straits Times Press (NSTP) — narrowed its losses after tax from RM17 million in 1QFY17 to RM2.2 million in 1QFY18. NSTP’s operations became nimbler with the closure of its printing plants in 2016 and 2017 and its 1QFY18 revenue inched down only 0.6% y-o-y, which Media Prima attributed to a near doubling of its digital assets’ revenue. We suspect its revenue was also supported by some one-off election-related advertisements
Media Prima’s revenue-diversification blueprint, codenamed “Odyssey”, was on track as of 1QFY18. Commerce and non-advertising revenue accounted for 25% of its 1QFY18 revenue versus its 22% target for the whole of FY18. Digital-based revenue was at 7% in 1QFY18 (FY18 target: 8%), while revenue from international markets came to 1% (FY18 target: 1%).
We slash our financial year 2018 forecast (FY18F) and FY20F earnings per share by 36% to 447% to account for larger declines in traditional print and TV adex. We now expect Media Prima to remain in the red until FY19F. We are concerned it would continue to be bogged down by its traditional businesses, which naturally have larger asset and cost bases than their digital counterparts. However, we expect media owners to benefit from the potential recovery in adex following the impending reduction in goods and services tax (GST) rate to 0% from June. — CGSCIMB Research, May 25