Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on December 18, 2019

Media Prima Bhd
(Dec 17, 29.5 sen)
Maintain hold with an unchanged target price of 29 sen:
The Edge reported that Media Prima Bhd gave official notifications to employees affected by its manpower rationalisation, part of the next phase of its business transformation. Under Media Prima, Sistem Televisyen Malaysia Bhd Employees Union, TV3 Executive Union, National Union of Journalists Peninsular Malaysia or NSTP branch and National Union of Newspaper Workers are affected.

According to the article, Media Prima is looking to trim 543 employees — 14% of its total workforce, without mentioning the total compensation package involved. We estimate that Media Prima — based on a similar exercise in 2017, where it forked out RM20 million for 243 employees — will need to fork out RM44 million as a compensation package for the 543 employees.

Based on the annual report for financial year 2018 (FY18), Media Prima incurred a total employees cost of RM382 million (ex-termination benefits) on a 3,900 headcount, translating into a staff cost of RM98,000 per employee per annum. Based on that figure, we estimate Media Prima could save about RM53 million annually from the whole exercise trimming 543 employees.

Overall, we are positive about the move to ensure Media Prima’s survival in the long term given a structural shift in the media sector towards digital. Media Prima has been hurt by weak contributions from traditional platforms — television and print segments. While its home shopping has shown promising top-line growth, this is unable to cushion the falling traditional segments.

Our forecasts are unchanged pending more clarity from the management on details of the exercise. However, based on our calculations, we estimate Media Prima to remain in the red in FY20 as the staff cost-savings will be offset by a compensation cost of about RM44 million. Media Prima is aligning its business towards digital, and we believe the rationalisation bodes well for its long-term strategy to reduce exposure to traditional platforms. — Hong Leong Investment Bank Research, Dec 17

      Print
      Text Size
      Share