This article first appeared in The Edge Financial Daily on June 3, 2019

Media Prima Bhd
(May 31, 36 sen)
Maintain neutral with a lower target price (TP) of 41 sen: Media Prima Bhd reported revenue of RM239.1 million (-14.7%  year-on-year (y-o-y) and a wider net loss of RM40.4 million (+86.1% y-o-y) in the first quarter of financial year 2019 (1QFY19), mainly attributable to the lower advertising expenditure (adex) spending across the media industry and higher-than-expected operating expenses.

Results came in below expectations, missing both of our and consensus forecasts. We are forecasting a higher net loss of RM52.9 million (from a net loss of RM36 million previously) to factor in the higher-than-expected operating expenses and softer adex especially in the traditional media segment.

Going forward, we remain cautious about the structural decline in the traditional media business given the shift of adex to digital platforms and the unfavourable macroeconomic conditions. Hence, we lower our price-to-book value-based TP to 41 sen. 1QFY19 revenue fell 14.7% y-o-y due to lower adex spending in both traditional and digital segment.

Last year, Media Prima’s revenue was higher as the group benefitted from the non-traditional advertisers. Traditionally, the 1Q has always been the slowest quarter for Media Prima. Lower revenue was recorded across all segments except for the home shopping platform. The home shopping segment continued to deliver encouraging revenue growth of 23.7% y-o-y contributed by the increase in airtime for home shopping slots and an increase in total quantity of items sold.

The group targets to break even its home shopping business segment by 2019. Print revenue experienced a sharp drop of 41% y-o-y due to the lower adex plus lower newspaper sales.

Cost savings will continue to be a priority for Media Prima with its previous efforts to bring down cost which includes manpower rationalisation is expected to materialise in the upcoming quarters.

Media Prima will continue to focus on its transformation journey with the digital and commerce segment being its key growth areas going forward. — PublicInvest Research, May 31