MEDIA (4502) - Media Prima Bhd - Structural shift is underway
Target RM0.72 (Stock Rating: HOLD)
Following Media Prima’s 4Q14 analyst briefing, we were negatively surprised by management’s pessimistic view on the prolonged weakness in adex spending continuing beyond 2H15. We cut FY15-17 EPS forecasts by 2-11% to account for a longer delay in advertisers spending from the implementation of the Goods and Services Tax in Apr 15. While we like Media Prima for its exposure in multiple platforms and dominant position in the free-to-air TV segment, we believe its dependence on traditional platforms is affecting its profitability due to weak adex and the shift to digital platforms. We maintain Hold with a slightly lower target price of RM1.70, based on 9.8x CY16 P/E, still at a 35% discount to our target market P/E of 15x. Switch to Astro for better exposure to the media sector.
What Happened
Approximately 15-20 analysts and fund managers attended Media Prima’s 4Q14 results briefing at Balai Berita Anjung Riong, Bangsar yesterday. The briefing was hosted by Dato’ Amrin Awaluddin, Group Managing Director and Mr. Mohammed Ariff Ibrahim, Group CFO. Management highlighted that the industry is facing a structural shift in adex away from traditional platforms towards online and digital. Management is guiding for moderate revenue growth of 5-7% in FY15, driven by a gradual recovery in adex spending. Apart from that, management also provided some insights into its recent cost rationalisation initiatives to improve the group’s operating efficiency. For example, Media Prima has already discontinued its late night TV operations across all four of its channels as part of the group’s cost-savings initiatives.
What We Think
We were negatively surprised by management’s pessimistic view on the adex spending recovery given that we expect adex to pick up in 2H15 as the anxiety over GST implementation subsides. However, we agree with management that the media industry is facing a structural shift in consumer consumption as adex is moving towards digital and online media. Hence, we see that it is crucial for Media Prima to find the best strategy to monetise its Tonton platform in order to capture the potential growth in digital and online platforms. Moreover, we expect it to benefit from the lower newsprint prices environment and the recent completion of its mutual separations scheme exercise.
What You Should Do
While the stock offers an attractive FY15-16 yield of 6.3-7.6%, we still prefer Astro for better exposure to the media sector.
Source: CIMB Daybreak - 27 February 2015
Target RM0.72 (Stock Rating: HOLD)
Following Media Prima’s 4Q14 analyst briefing, we were negatively surprised by management’s pessimistic view on the prolonged weakness in adex spending continuing beyond 2H15. We cut FY15-17 EPS forecasts by 2-11% to account for a longer delay in advertisers spending from the implementation of the Goods and Services Tax in Apr 15. While we like Media Prima for its exposure in multiple platforms and dominant position in the free-to-air TV segment, we believe its dependence on traditional platforms is affecting its profitability due to weak adex and the shift to digital platforms. We maintain Hold with a slightly lower target price of RM1.70, based on 9.8x CY16 P/E, still at a 35% discount to our target market P/E of 15x. Switch to Astro for better exposure to the media sector.
What Happened
Approximately 15-20 analysts and fund managers attended Media Prima’s 4Q14 results briefing at Balai Berita Anjung Riong, Bangsar yesterday. The briefing was hosted by Dato’ Amrin Awaluddin, Group Managing Director and Mr. Mohammed Ariff Ibrahim, Group CFO. Management highlighted that the industry is facing a structural shift in adex away from traditional platforms towards online and digital. Management is guiding for moderate revenue growth of 5-7% in FY15, driven by a gradual recovery in adex spending. Apart from that, management also provided some insights into its recent cost rationalisation initiatives to improve the group’s operating efficiency. For example, Media Prima has already discontinued its late night TV operations across all four of its channels as part of the group’s cost-savings initiatives.
What We Think
We were negatively surprised by management’s pessimistic view on the adex spending recovery given that we expect adex to pick up in 2H15 as the anxiety over GST implementation subsides. However, we agree with management that the media industry is facing a structural shift in consumer consumption as adex is moving towards digital and online media. Hence, we see that it is crucial for Media Prima to find the best strategy to monetise its Tonton platform in order to capture the potential growth in digital and online platforms. Moreover, we expect it to benefit from the lower newsprint prices environment and the recent completion of its mutual separations scheme exercise.
What You Should Do
While the stock offers an attractive FY15-16 yield of 6.3-7.6%, we still prefer Astro for better exposure to the media sector.
Source: CIMB Daybreak - 27 February 2015
