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This article first appeared in The Edge Financial Daily on November 23, 2018

Media Prima Bhd
(Nov 22, 40 sen)
Maintain sell with a lower target price (TP) of 29 sen:
Media Prima Bhd’s cumulative nine months ended Sept 30, 2018 (9MFY18) core net loss of RM65.9 million (-15.2% year-on-year [y-o-y]) came in below our and consensus estimates, accounting for 100.1% and 172.7% of respective loss forecast.

The miss was due to higher than expected decline in advertising expenditure (adex) alongside continued challenges from the downtrend in traditional adex.

Core net loss excludes RM45.3 million of proceeds from the sale of Malaysian Newsprint Industries, a former associate of its print business, in the second quarter ended June 30, 2018 (2QFY18) (May 2018).

In the third quarter (3QFY18), core net loss worsened to more than 100% quarter-on-quarter (q-o-q) to RM30.7 million as the TV and print segments, respectively with net loss of RM30.9 million and RM9.6 million, continued to be challenged by the structural decline in traditional adex (-34.1% q-o-q).

While digital adex also declined (-25.7% q-o-q), we opine that it was largely due to seasonality (adex tends to be softer in 1Q and 3Q and stronger in 2Q and 4Q).

Encouragingly, the home shopping business, CJ Wow Shop, is closer to breaking even (targeted in first half of the FY19) with net loss narrowing from RM900,000 to RM200,000.

It was also the only segment to record revenue growth on a q-o-q basis aided by its increased accessibility following its partnership with unifi TV since June 2018.

Year to date, 9MFY18’s revenue was held steady (+0.6% y-o-y) as traction at the home shopping (+63.4% y-o-y), digital (+80.4% y-o-y), and out-of-home (+2.5% y-o-y) businesses offset weakness at the print (-16.9% y-o-y), TV (- 7.6% y-o-y), content creation (-11.4% y-o-y) and radio network (-11.6% y-o-y) businesses.

Effectively, the group is making progress with its Odyssey transformation plan, which aims to grow revenue contributions beyond its core traditional businesses.

In 9MFY18, its revenue mix was 73% adex (-6 percentage points [ppts] y-o-y), 20% commerce (+8ppts y-o-y) and 7% circulation (-2ppts y-o-y). — TA Securities Research, Nov 22

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