RAM Ratings reaffirms Media Prima’s ratings

Published on 13 August 2012

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) has also been reaffirmed. The enhanced rating of the BG MTN reflects the unconditional and irrevocable guarantee extended by Malayan Banking Berhad, 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. It is highly diversified, with interests in a broad spectrum of media such as free-to-air television (“TV”) broadcasting, newspaper publication, radio broadcasting, outdoor advertising, and content creation and online portals, and continues to lead in almost every media sub-segment it operates in.

The Group’s financial profile also stayed robust. Backed by its enlarged shareholders’ funds amid the conversion of employee share options and warrants, narrower accumulated losses, as well as a lighter debt load, Media Prima’s adjusted gearing ratio had eased to 0.45 times as at end-FYE 31 December 2011 (“FY Dec 2011”) (FY Dec 2010: 0.55 times). At the same time, its adjusted funds from operations debt cover (“FFODC”) also strengthened to 0.59 times (FY Dec 2010: 0.52 times) mainly attributed to the lower debt level.

However, the Group is susceptible to economic cycles, newsprint price movements and intense competition within the media sector, particularly from other major media groups such as Star Publications (M) Berhad, Astro All Asia Networks Plc and Radio Television Malaysia. “The competitive backdrop is further exacerbated by the emergence of more new media platforms such as online news portals and new channels via broadband-based TV services, such as UniFi and Yes, over the last few years. This year, the prospective debut of YTL Communications Sdn Bhd’s hybrid-TV service, new entrant Asian Broadcasting Network (M) Sdn Bhd’s pay-TV service and Maxis Berhad’s Internet-portal TV service is set to widen advertisers’ choices further. To keep up with the competition, Media Prima has to continuously invest in quality content,” notes Kevin Lim, RAM Ratings’ Head of Consumer & Industrial Ratings.

Looking forward, akin to its plans a year ago, Media Prima has allocated RM100 million-RM120 million of capital expenditure per annum for the next 3 years, to continue replacing its broadcasting and transmission equipment in progress to be digital-TV ready. This is anticipated to be funded via internal cash, without requiring debt funding. As such, the Group’s balance sheet is expected to stay sturdy.

Despite the softer advertising environment (as seen in the more modest financial results in 1Q FY Dec 2012), Media Prima is still expected to grow in the near term backed by major sporting events this year, particularly the UEFA Euro 2012 (which was held in June) and the 2012 Summer Olympic Games, as well as a prospective general election. However, given the Group’s plans to increase spending on content to garner higher TV ratings coupled with costly broadcast rights to Euro 2012, Media Prima’s profitability may dilute year-on-year. Furthermore, we expect newsprint costs to rise. Notwithstanding the cost increase, the Group’s adjusted FFODC is expected to improve to around 0.4 times for FY Dec 2012.

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