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This article first appeared in The Edge Financial Daily on September 13, 2019

Media Prima Bhd
(Sept 12, 48 sen)
Maintain sell with an unchanged target price (TP) of 38 sen:
Aurora Mulia Sdn Bhd, a company reportedly linked to Tan Sri Syed Mokhtar Albukhary, had acquired a 20.6% stake in Media Prima Bhd since July 2019. We believe Syed Mokhtar could be eyeing Media Prima’s home-shopping and digital segments which have inadvertently been increasing revenue contribution to the group (six months of 2019 [6M19]: 25% versus 6M18: 19%) as opposed to traditional media assets (television, print and radio) which shrank to 59% in 6M19 from 66% in 6M18.

 

Among Media Prima’s seven business segments, it is apparent that the home shopping and digital segments are delivering the highest growth prospects. As part of the group’s transformation plan, the management is targeting to achieve 40% commerce and non-advertising revenue, and 20% in digital revenue, from 2020 onwards. In view of the progressive shift towards being a commerce and digital content entity, we think prospects of both segments should gradually carry more weight in Media Prima’s valuation.

 

Separately, the Malaysian Communications and Multimedia Commission has announced that a full analogue-switch off will be carried out in stages by end-September. We are neutral on this given that any potential cost savings may be negated by risk of greater competition within the free-to-air space as advertisement pricing could be affected as a result of a more fragmented viewership.

We made no major changes to our earnings estimates, projecting core net loss at RM82 million/RM55 million/RM40 million over financial years 2019 to 2021 (FY19-21E). We reaffirm our valuation target of 1.5 times (one standard deviation below three-year average) 2020E net tangible assets per share of 25 sen. Despite better prospects of its home shopping segment, which is still running at a loss, and digital venture, as well as the presence of a new major shareholder, we think it is still too early to get excited over the stock. Given a 21% potential downside to our TP of 38 sen, we reiterate our “sell” rating. — Affin Hwang Capital, Sept 12

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