MEDIA (4502) : Media Prima Bhd - Still hurt by weak sentiment
Target RM2.00 (Stock Rating: HOLD)
Media Prima’s annualised 9M14 core net profit came in below at 71% and 77% of our and consensus full-year estimates, respectively, due to overall weakness in adex (-9.5%) and print circulation (-20.6%). As such, we cut our FY14-16 EPS by 15-22%. Although the 2H has traditionally been stronger, we believe the negative consumer sentiment from the impending Goods and Services Tax (GST) and fuel subsidy rationalisation which has been dampening advertising spending, would continue to plague the industry until 1H15. Hence, we maintain our Hold call, with a lower target price, based on 11.4 CY16 P/E, a 30% discount to market P/E of 16.3x (20% before) due to prolonged weakness in consumer sentiment. Switch to Astro for exposure to the media sector.
Hit in most segments
Media Prima’s 9M14 core net profit fell by 30% yoy mainly due to a large decline in revenue contribution from key traditional platforms such as TV (-9.8%) and print (-16.7%), on the back of lower advertising spending (-9.5%), print circulation (-20.6%) and absence of non-traditional advertisers. Outdoor and radio segment revenue also fell by 8% and 0.8%, respectively. Following the decline in sales, its EBITDA margin fell by 2.8% pts from 21.7% to 18.9% pts. The company declared a second interim dividend of 3 sen in 3Q14, which was in line with our expectation. Capex in 9M14 fell by 34% yoy as management is intends to invest for growth in digital and content segments.
Staying cautious for 2015
We expect to see a modest increase in 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 on 2015 adex spending due to the pending implementation of GST and the government’s on-going subsidy rationalisation plan. We expect the weakness to continue until 1H15.
Potential for special dividends
Although the share price is down 27% YTD, we remain cautious given the weakness in consumer sentiment and strong competition from the digital platform. However, we see re-rating catalysts from a potential special dividend given its strong balance sheet position, which currently is in a RM100m net cash position. Management has indicated that the company can afford to pay a special dividend to reward shareholders given the strong balance sheet.
Source: CIMB Daybreak - 07 November 2014
Target RM2.00 (Stock Rating: HOLD)
Media Prima’s annualised 9M14 core net profit came in below at 71% and 77% of our and consensus full-year estimates, respectively, due to overall weakness in adex (-9.5%) and print circulation (-20.6%). As such, we cut our FY14-16 EPS by 15-22%. Although the 2H has traditionally been stronger, we believe the negative consumer sentiment from the impending Goods and Services Tax (GST) and fuel subsidy rationalisation which has been dampening advertising spending, would continue to plague the industry until 1H15. Hence, we maintain our Hold call, with a lower target price, based on 11.4 CY16 P/E, a 30% discount to market P/E of 16.3x (20% before) due to prolonged weakness in consumer sentiment. Switch to Astro for exposure to the media sector.
Hit in most segments
Media Prima’s 9M14 core net profit fell by 30% yoy mainly due to a large decline in revenue contribution from key traditional platforms such as TV (-9.8%) and print (-16.7%), on the back of lower advertising spending (-9.5%), print circulation (-20.6%) and absence of non-traditional advertisers. Outdoor and radio segment revenue also fell by 8% and 0.8%, respectively. Following the decline in sales, its EBITDA margin fell by 2.8% pts from 21.7% to 18.9% pts. The company declared a second interim dividend of 3 sen in 3Q14, which was in line with our expectation. Capex in 9M14 fell by 34% yoy as management is intends to invest for growth in digital and content segments.
Staying cautious for 2015
We expect to see a modest increase in 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 on 2015 adex spending due to the pending implementation of GST and the government’s on-going subsidy rationalisation plan. We expect the weakness to continue until 1H15.
Potential for special dividends
Although the share price is down 27% YTD, we remain cautious given the weakness in consumer sentiment and strong competition from the digital platform. However, we see re-rating catalysts from a potential special dividend given its strong balance sheet position, which currently is in a RM100m net cash position. Management has indicated that the company can afford to pay a special dividend to reward shareholders given the strong balance sheet.
Source: CIMB Daybreak - 07 November 2014
