This article first appeared in The Edge Financial Daily on February 8, 2019
Media Prima Bhd
(Feb 7, 41 sen)|
Maintain sell with a reduced target price (TP) of 30 sen (previously 33 sen). We expect Media Prima’s (MPR) key traditional media divisions such as television and publishing to remain subdued given the ongoing structural decline while contribution from the bright spots — non-core and/or digital segments (out of home [OOH]), radio, digital, content and home shopping) — is still unable to offset losses in the core divisions.
All in, we believe MPR will need time to turn things around before getting back to core profitability. With no immediate catalysts in sight, we reaffirm our “sell” rating with a TP of 30 sen.
The increasing preference towards online reading and a lacklustre advertising expenditure (adex) market have led to persistent declines in MPR’s key traditional TV and publishing segments. With the lack of adex boosting mega events in 2019, we expect these segments to stay muted in the near term. Given the challenging environment, we could see further manpower rationalisation as the current staff count is still high in view of the increasingly shrinking operations. The current staff count for the TV and publishing segments are around 700 and 1,300 respectively.
MPR had in the past year initiated a string of transformational changes to unlock opportunities in its existing businesses, namely Tonton’s tie-up with YouTube and Dailymotion; OOH’s launch of Big+ by BigTree; radio’s revamp of its business as Ripple; and digital’s RevAsia partnership with Mashable.
This comes in line with MPR’s Odyssey transformational plan to reinvent the group as a digital first content and commerce entity. We expect these new revenue streams to take the lead in driving the group’s earnings in the long run, likely post-2020.
Taking into account the continued weakness in the publishing segment and broad adjustments across other segments, we are now projecting a core loss of RM90.9 million for 2018 and a narrower loss of RM38.1 million for 2019.
Management is taking various measures to unlock its existing assets through digital innovation and commerce-oriented strategies in addition to cost rationalisation exercises. Nevertheless, we believe more time is needed before these non-core and or digital segments can generate sufficient earnings to cushion the drag caused by the TV and publishing segments.
With no immediate catalyst to stage a turnaround in the near term, we reaffirm our “sell” rating on MPR. Our TP of 30 sen is based on 0.9 times 2019E net tangible assets per share. — Affin Hwang Capital, Feb 6