RAM Ratings assigns preliminary AA2/P1 ratings to Media Prima’s proposed debt facilities, reaffirms rating of existing issue

Published on 03 December 2012

RAM Ratings has assigned respective preliminary long- and short-term ratings of AA2 and P1 to Media Prima Berhad’s (“Media Prima or the Group”) proposed RM500 million Commercial Papers/Medium-Term Notes Programme (2012/2019) (“CP/MTN”), with a stable outlook. At the same time, the P1 rating of the Group’s RM180 million Commercial Papers Programme (2007/2014) has been reaffirmed.

The ratings reflect Media Prima’s strong market position in the media industry and 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 as well as content creation and online portals, and continues to lead in almost every media sub-segment in which it operates. The Group retained its lead given its 47% share of overall TV industry advertising expenditure (“adex”). Media Prima’s subsidiary, The New Straits Times Press (Malaysia) Berhad (“NSTP”), also holds a respectable position in the newspaper publication market with an aggregate 30% share of newspaper adex; its popular tabloid, Harian Metro, is the most-circulated newspaper in Malaysia. Within the outdoor advertising segment, the Group boasts a leadership position with a 44% adex share.

The Group also boasts a robust financial profile. Its adjusted gearing ratio had trended down to 0.45 times as at end-December 2011 (from 0.67 times as at end-December 2009). This had been aided by the Group’s enlarged capital base amid the conversion of employee share options and its strong earnings, as well as a lighter debt load. Media Prima also has a sturdy cash-generating ability, with at least RM300 million of funds from operations (“FFO”) annually since FYE 31 December 2010 (i.e. post-consolidation of NSTP). This had translated into a robust average adjusted FFO debt cover of over 0.50 times for the last 2 years. Looking forward, the Group’s medium-term capital expenditure plans involve replacing its assets to be digital-TV ready, which is expected to be funded via drawdown from the proposed CP/MTN. At the same time, the Group will also be repaying some existing borrowings from its internal cash holdings. As such, its financial profile is expected to stay sturdy.

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 exacerbated by the emergence of 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,” notes Kevin Lim, RAM Ratings’ Head of Consumer & Industrial Ratings. “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,” he adds.

For further details on Media Prima’s industry and business assessment, please refer to the rationale published by RAM Ratings on 13 August 2012.

Media contact

Low Pui San

(603) 7628 1051

puisan@ram.com.my