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Media Prima Bhd
(June 29, RM1.50)
Maintain sell with a target price (TP) of RM1.07:
Media Prima Bhd (MPR) guided that its earnings for the second quarter ending June 30 of financial year 2015 (2QFY15) will likely be weaker on a year-on-year basis, given the lacklustre advertising expenditure (adex) for April to May 2015, partly attributable to advertisers being cautious about ad spending given the implementation of the goods and services tax (GST) and the continuous uncertainties in the market. We believe that the main challenges for MPR’s print and TV network divisions remain.

Average daily circulation in 2014 for New Straits Times, Berita 

Harian and Harian Metro declined by 24,900, 21,600 and 74,100 copies, respectively, to 71,800, 117,300 and 290,000. Going forward, we expect MPR’s print division to continue to lose its readership, especially to online media.

In view of the slowdown in adex and newspaper circulation numbers, we cut our FY15 to FY17 estimate (E) core earnings per share (EPS) by 20% to 36% after imputing: 1) a lower TV adex assumption by 5% to 16% for FY15 to FY17E; 2) a lower FY15 to FY17E average daily circulation assumption by 6% to 17% for News Straits Times, Berita Harian and Harian Metro; and 3) a lower newsprint price assumption by between 3% and 5% to between US$515/MT and US$530/MT for FY15 to FY17E.

We maintain our “sell” rating on MPR, with a lower TP of RM1.07, based on nine times FY16E EPS (one standard deviation below four-year average). We are still cautious about MPR due to: 1) the unfavourable shift of broadcast adex towards the pay-TV segment; 2) potentially cautious ad spending given the implementation of the GST and uncertainties in the market; 3) rising competition from other broadcasters; 4) negative effects on adex due to declining TV viewership; and 5) negative effects on hard copy circulation due to the continuous shift of readers’ preference for reading on mobile or over the Internet. 

The potential upside risks to our recommendation would be: 1) continuous strength in MPR’s main segments (TV and print); 2) higher-than-expected adex revenue contribution; and 3) a substantial increase in hard copy newspaper circulation. — Affin Hwang Capital, June 29

Media-Prima_300615_theedgemarkets

This article first appeared in The Edge Financial Daily, on June 30, 2015.

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