Media Prima Bhd
(March 25, RM1.72)
Maintain neutral with target price of RM1.79: More than 80% of current group’s total revenue is derived from only two segments — television (42.7%) and print (39.3%), and 80% of total revenue is contributed by advertising expenditure (adex). Some 98% of the group’s revenue is Malaysia sourced.

Management believes content and the digital space are keys to addressing the current challenges faced by the group. Though a big chunk of adex still remains within the traditional platforms, digitalisation is the future platform as consumers have gradually shifted to online space as their preferred means of media consumption. While management opines that the digital platform is crucial moving forward, monetisation remains a big challenge. Saleable content such as documentaries and dramas would allow the group to cross beyond domestic borders and reduce reliance on advertising revenue. However, we see both digital and content having a relatively long gestation phase as both only contributed 3.5% to financial year 2014 (FY14) revenue cumulatively (digital: 2.2%, content: 1.3%), and reported losses.

Barring any unfortunate incidents, management anticipates low single-digit growth for 2015. The first month of this year was impacted by the AirAsia flight QZ8501 tragedy and floods in the East Coast. Management is also concerned that there could be prolonged sentiment effects after the goods and services tax  (GST) implementation, as experienced in other countries.

Media Prima does not anticipate any competition from MYTV’s roll-out plans as current transmission fees of RM25 million for high-definition channel and RM12 million for standard-definition channel are deemed too expensive for any media players.

Despite the cautious outlook on the media industry, we believe Media Prima’s attractive dividend yield (>5%) will support its share price at current levels. — PublicInvest Research, March 25

This article first appeared in The Edge Financial Daily, on March 26, 2015.