Friday 29 Mar 2024
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KUALA LUMPUR (Sept 5): RAM Rating Services Bhd has revised the outlook for Media Prima Bhd's long-term ratings to negative from stable, while reaffirming its long-term rating of AA1 and short-term rating of P1 for the group's RM500 million CP/MTN Programme (2012/2019).

In a statement today, the ratings agency said the outlook revision was based on concerns that the group's lower circulation over the past two years may continue to deteriorate or not recover, as well as uncertainty surrounding the rollout of digital TV terrestrial broadcasting.

"Additionally, the weaker consumer sentiment and challenging advertising expenditure (adex) environment amid a fundamental shift to new media had led to a 21.8% (RM80 million) drop in Media Prima's operating profit before depreciation, interest and tax (OPBDIT) over the past two years.

"In 1HFY16, adex hold-back by advertisers continued, as the group's revenue and OPBDIT (excluding costs related to home-shopping venture of circa RM14 million) contracted by 6.0% and 25.7% respectively," noted RAM.

The agency said Media Prima's overall circulation contracted 42.4% in the first half of 2016, on the back of a decline in the circulation of the group's Malay-language newspapers.

RAM said the group's newspapers could lose competitiveness as an attractive advertising avenue if the declining circulation trend persists.

"While we acknowledge that Media Prima's channels are critical to the new digital platform, there are uncertainties with regard to the migration moving forward. If the current hefty broadcasting fee remains, it will impact Media Prima's cost structure.

"On the other hand, if the fee is negotiated downwards, this may encourage greater competition. Also, the take up of the set-up boxes remains to be seen. We are of the view that Media Prima's free-to-air (FTA) TV model may be at risk of being altered fundamentally and negatively impacted," it said.

However, RAM said the group's long-term outlook could revert to stable if the FTA TV model is maintained and margins are not significantly impacted, adding that a reversion could also happen if the print division is able to maintain or improve its real advertising revenue and stop the decline in its circulation numbers.

It added that the preservation of Media Prima's financial profile would further warrant a revision.

RAM said Media Prima's ratings continue to be supported by the group's strong market position in the media advertising industry, and said that its strong multi-platform capability will continue to be used to its advantage.

"These strengths are, however, moderated by the rise of digital media coupled with the fundamental change in consumer trends and preferences. As Media Prima is primarily involved in traditional media platforms, changing consumer preferences may, in our view, trigger a shift in some of the Group's advertisers moving forward.

"Media Prima's adex-dependent performance is further susceptible to economic cycles and newsprint-price volatility," said the ratings agency.

 

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