Media Prima Bhd
(Jan 5, RM1.74)
Maintain “hold” with a higher target price (TP) of RM1.56 from RM1.50: The 20% to 25% increase in Media Prima’s English and Malay newspapers cover prices starts this month.

We have raised Media Prima’s 2015 to 2016 earnings per share (EPS) by 2% to 5% after factoring in lower newspaper circulation.

We maintain our “hold” rating on Media Prima with a higher TP of RM1.56 (based on nine times 2015 EPS).

Media Prima raised both New Straits Times and New Sunday Times cover prices for Peninsular Malaysia by 30 sen (or 25%) each to RM1.50 respectively. The last hike in cover prices for New Straits Times was in January 2003.

For Berita Harian and Harian Metro, both newspapers cover prices have been increased by 30 sen (or 20%) each to RM1.80 respectively. However, those of Berita Harian Ahad and Metro Ahad were maintained at RM2 each. The last increase in cover prices for Berita Harian was in January 2005 while for Harian Metro was in April 2009.

These cover price hikes were unexpected, given a tough market environment coupled with a lack of feel-good factor for advertising spending resulting from the impending goods and services tax implementation and a lack of mega events scheduled in 2015. 

Also, readers’ preference for online news has negatively affected demand for hard copy newspapers.

We have increased Media Prima’s 2015 to 2016 EPS by 2% to 5% after accounting for an increase in the cover prices of its newspapers by 20% to 25% and a decline in average daily circulation assumption by 2% to 20% for New Straits Times, Berita Harian and Harian Metro.

We maintain our “hold” rating on Media Prima but have nudged up our TP to RM1.56 (from RM1.50) based on an unchanged nine times 2015 EPS. We believe Media Prima’s earnings should improve in 2015 after an exceptionally weak 2014 (26% earnings contraction) due to airplane tragedies that have affected ad spending.

However, we remain cautious on Media Prima’s primarily due to the tough industry environment and a lack of catalysts. — Affin Hwang Investment Bank Bhd, Jan 5.

This article first appeared in The Edge Financial Daily, on January 6, 2015.