RAM Ratings reaffirms Media Prima's ratings

Published on 03 August 2011
RAM Ratings has reaffirmed the AAA(bg) rating of Media Prima Berhad’s (Media Prima or the Group) RM170 million Bank-Guaranteed Medium-Term Notes Programme (2007/2012) (BG MTN), with a stable outlook. At the same time, the P1 rating of the Group’s RM180 million Commercial Papers Programme (2007/2014) (CP) has also been reaffirmed. The enhanced rating of the BG MTN reflects the unconditional and irrevocable guarantee extended by Malayan Banking Berhad (Maybank), which enhances the credit profile of the debt issue beyond Media Prima’s inherent or stand-alone credit position.

Media Prima’s stand-alone credit profile and P1 rating reflect its strong market position in the media industry, as well as its solid financial profile. The Group’s business is highly diversified (with interests in a broad spectrum of media such as free-to-air television (FTA TV) broadcasting, newspaper publication, radio broadcasting, outdoor advertising, content creation and online portals) and it is the leader in almost every media sub-segment it operates in.



The Group’s financial profile had strengthened as at end-December 2010. Following the consolidation of The New Straits Times Press (Malaysia) Berhad’s contribution and the healthier operating environment amid stronger domestic economic growth, Media Prima’s top line surpassed RM1 billion while its operating profit more than doubled year-on-year in FYE 31 December 2010 (FY Dec 2010). As at end-FY Dec 2010, its adjusted funds from operations debt cover (FFODC) soared to 0.51 times (end-FY Dec 2009: 0.18 times). Supported by enlarged shareholders’ funds as well as a lighter debt load, its adjusted gearing ratio eased from 0.67 to 0.55 times as at the same time.

However, Media Prima is susceptible to economic cycles given its substantial reliance on advertising expenditure (adex), which tends to move in tandem with the country’s economic health. The Group also faces intense competition. Coupled with the emergence of new platforms, the media industry is getting increasingly more fragmented, which may erode Media Prima’s share of adex over the longer term. The Group is also vulnerable to volatile newsprint prices, which have been gradually rising.

Nonetheless, it has bought forward as much as 10 months of newsprint, thus affording it some flexibility when it comes to purchasing this commodity.

As Media Prima’s 5 media platforms (i.e. FTA TV, print, radio, outdoor and online) enable its contents to be platform-agnostic (i.e. can be read on various platforms, including mobile devices), we expect it to have an edge over its peers, at least over the medium term. “Apart from its ability to capture a larger slice of adex, its multi-platform capability also offers group synergies via content cross-promotions and effective associations across media platforms. In addition, Media Prima’s efforts to continue investing in quality and relevant contents are expected to help retain its dominance while broadening its operational statistics to garner higher adex,” opines Kevin Lim, RAM Ratings’ Head of Consumer & Industrial Ratings.

Looking ahead, Media Prima has allocated RM100 million-RM120 million of capital expenditure (capex) per annum for the next 4 years, for replacement of broadcasting and transmission equipment that is partly in line with its migration to digital and high-definition equipment. “Despite this, its adjusted gearing ratio is expected to stay low at around 0.4 times over the next 2 years; its adjusted FFODC is envisaged to remain robust at around 0.6 times over the same span,” notes Kevin Lim.

Media contact
Low Pui San
(603) 7628 1051
puisan@ram.com.my