Thursday 28 Mar 2024
By
main news image

Media Prima Bhd
(Nov 7, RM1.83)
Maintain “hold” with a target price of RM2:
Media Prima’s nine months of 2014 (9MFY14) core net profit fell by 30% year-on-year (y-o-y) mainly due to a large decline in revenue contribution from key traditional platforms such as TV (down 9.8%) and print (down 16.7%), on the back of lower advertising spending (down 9.5%), print circulation (down 20.6%) and absence of non-traditional advertisers. The outdoor and radio segments’ revenue also fell by 8% and 0.8%, respectively.

Following the decline in sales, its earnings before interest, taxes, depreciation and amortisation (ebitda) margin fell by 2.8% points from 21.7% to 18.9% points. The company declared a second interim dividend of 3 sen in third quarter of 2014 (3QFY14), which was in line with our expectation.

Capital expenditure in 9MFY14 fell by 34% y-o-y as management intends to invest for growth in digital and content segments.

We expect to see a modest increase in advertising expenditure (adex) spending in 4Q due to year-end annual festivities, along with the advertisers’ usual strategy of spending their annual budgets prior to year-end.

Still, we stay cautious about 2015 adex spending due to the pending implementation of the goods and services tax and the government’s on-going subsidy rationalisation plan. We expect the weakness to continue until the first half of 2015 (1H15).

Although the share price is down 27% year-to-date, we remain cautious given the weakness in consumer sentiment and strong competition from the digital platform. However, we see rerating catalysts from a potential special dividend given its strong balance sheet position, which currently is in a RM100 million net cash position.

Management has indicated that the company can afford to pay a special dividend to reward shareholders given the strong balance sheet. — CIMB Research, Nov 7

Media-Prima_theedgemarkets

This article first appeared in The Edge Financial Daily, on November 10, 2014.

      Print
      Text Size
      Share