This article first appeared in The Edge Financial Daily, on October 5, 2015.

Media Prima Bhd
(Oct 2, RM1.28)
Maintain outperform call with an unchanged target price (TP) of RM1.40: Media Prima has entered into a conditional purchase agreement to acquire the entire stake in Copyright Laureate Sdn Bhd (CLSB) for a cash consideration of RM20 million.

CLSB was incorporated on Sept 16, 2009, with a fully issued and paid-up capital of RM500,000 and operates two radio broadcasting stations, namely Ultra FM and Pi Mai FM.

We deem the price tag of RM20 million for the two radio broadcasting licences as fair considering Capital FM was acquired by the Star Media group for RM16.5 million (80% equity interest for RM15 million in 2011 and balance of a 20% stake for RM1.5 million in 2015), and Media Prima acquired an 80% stake in Radio Wanita, which was later rebranded as One FM for RM12.2 million in 2008.

Both Ultra FM and Pi Mai FM, 24-hour Malay language radio stations, were launched in 2013.

While Ultra FM broadcasts in the Klang Valley vicinity at a frequency of 101.3MHz, Pi Mai FM caters for Penang and certain areas in the north on 90.2MHz.

The proposed acquisition would add another two radio broadcasting stations to the group’s existing Hot FM, Fly FM and One FM channels.

Cumulatively, Media Prima captures the second-largest radio listenership in Malaysia with a total of four million listeners.

As the radio broadcasting licence and spectrum are limited, media companies have no option but to acquire existing licences in order to expand their portfolios.

We understand the newly acquired radio stations will be revamped and relaunched for promotional and marketing strategies.

The effort to transform the unpopular stations may take lesser time due to the group’s expertise and strength in the media industry.

The acquisition would enhance the group’s growing market share in the Malay radio segment.

According to the latest Radio Audience Measurement survey results by Nielsen, Malaysian radio listeners have grown steadily in the past five years, with 95% of individuals aged 10 years and above in Peninsular Malaysia spending more than two hours a day on average listening to their favourite radio station.

This shows radio is still an important entertainment medium to consumers. Radio is also the cheapest advertising platform compared to TV and print, hence there was a shift of advertisement spending trend recently due to the cheaper option. — PublicInvest Research, Oct 2