Media Prima Bhd - Newspaper price hikes
MEDIA (4502) : Target RM1.80 (Stock Rating: HOLD)
Media Prima has raised the cover prices of its Malay- and English-medium newspapers by 11-33%. We are positively surprised by the group’s decision amidst market uncertainty and soft advertising expenditure. Hence, we raise our FY15-16 EPS forecasts by 2.5-4.7% to account for the price hike. We maintain Hold call on the stock, with a lower target price of RM1.80, based on 9.8x CY16 P/E, still at 35% discount to our revised target market P/E of 15x. Despite the potential recovery in consumer sentiment following the fuel price cuts announcement, the company’s outlook remains challenging given its dependency on traditional media amid the shift in adex to the digital platform. Switch to Astro for better exposure in Malaysian media sector.
What Happened
Media Prima raised the cover prices of its Malay and English newspapers by 11-33% effective 1 Jan 15. According to our channel checks, both the cover prices of Malay-medium newspapers “Berita Harian” and “Harian Metro (HM)” increased by 20% or 30 cents from RM1.50 to RM1.80 for Peninsula Malaysia, while the cover price of HM was increased by 33% or 50 cents for Sabah and Sarawak. In addition, the cover prices for its English newspaper “New Straits Times” was also raised by 25% or 30 cents to RM1.50 from RM1.20 for Peninsula Malaysia and by 11% or 20 cents for Sabah and Sarawak.
What We Think
We are positively surprised by the company’s decision to raise its cover prices amidst market uncertainty and soft advertising expenditure. We estimate that the price hike could improve the group’s print margin and increase its FY15-16 EPS by 5-6% if the group can maintain its circulation volume. Nevertheless, we see a potential 10-20% drop in circulation volume on top of the already declining trend in print circulation, may reduce the positive impact of the newspaper price hike. Apart from that, we see the latest fuel cut announcement by the government to be positive for consumer sentiment and should help to alleviate some concerns on the pending implementation of goods and services tax (GST) in Apr 15. The company had also recently completed its mutual separation scheme aimed at improving its operating efficiency. The exercise could bring annual savings of about RM45m or 3-4% of its operating cost, based on 10% headcount reduction.
What You Should Do
We maintain our Hold rating due to its attractive FY15 yield of 6.9% and strong balance sheet position with a healthy free cashflow generation.
Source: CIMB Daybreak - 02 January 2015
MEDIA (4502) : Target RM1.80 (Stock Rating: HOLD)
Media Prima has raised the cover prices of its Malay- and English-medium newspapers by 11-33%. We are positively surprised by the group’s decision amidst market uncertainty and soft advertising expenditure. Hence, we raise our FY15-16 EPS forecasts by 2.5-4.7% to account for the price hike. We maintain Hold call on the stock, with a lower target price of RM1.80, based on 9.8x CY16 P/E, still at 35% discount to our revised target market P/E of 15x. Despite the potential recovery in consumer sentiment following the fuel price cuts announcement, the company’s outlook remains challenging given its dependency on traditional media amid the shift in adex to the digital platform. Switch to Astro for better exposure in Malaysian media sector.
What Happened
Media Prima raised the cover prices of its Malay and English newspapers by 11-33% effective 1 Jan 15. According to our channel checks, both the cover prices of Malay-medium newspapers “Berita Harian” and “Harian Metro (HM)” increased by 20% or 30 cents from RM1.50 to RM1.80 for Peninsula Malaysia, while the cover price of HM was increased by 33% or 50 cents for Sabah and Sarawak. In addition, the cover prices for its English newspaper “New Straits Times” was also raised by 25% or 30 cents to RM1.50 from RM1.20 for Peninsula Malaysia and by 11% or 20 cents for Sabah and Sarawak.
What We Think
We are positively surprised by the company’s decision to raise its cover prices amidst market uncertainty and soft advertising expenditure. We estimate that the price hike could improve the group’s print margin and increase its FY15-16 EPS by 5-6% if the group can maintain its circulation volume. Nevertheless, we see a potential 10-20% drop in circulation volume on top of the already declining trend in print circulation, may reduce the positive impact of the newspaper price hike. Apart from that, we see the latest fuel cut announcement by the government to be positive for consumer sentiment and should help to alleviate some concerns on the pending implementation of goods and services tax (GST) in Apr 15. The company had also recently completed its mutual separation scheme aimed at improving its operating efficiency. The exercise could bring annual savings of about RM45m or 3-4% of its operating cost, based on 10% headcount reduction.
What You Should Do
We maintain our Hold rating due to its attractive FY15 yield of 6.9% and strong balance sheet position with a healthy free cashflow generation.
Source: CIMB Daybreak - 02 January 2015
