AmWatch - Media Prima : Sporting events to support TV adex growth ahead BUY, 9 May 2014

STOCK FOCUS OF THE DAY

Media Prima : Sporting events to support TV adex growth ahead              BUY

We maintain BUY on Media Prima (MPR) with an unchanged fair value of RM2.95/share, based on a 10% discount to our DCF valuation. MPR reported a flat 1QFY14 earnings of RM27mil (-0.3% YoY, -57.4% YoY), constituting only 12% of our and consensus estimates. As the first quarter is seasonally the weakest, we deem the results to be within expectations. Overall adex revenue contracted by 2% YoY in 1QFY14, as the same period last year recorded a strong performance due to increased adex spending by non-traditional advertisers ahead of the general election.

Print segment’s revenue saw a decline of 15% YoY, due to lower adex and circulation. Outdoor media’s revenue similarly reduced by 7%, due to a slower take-up rate by advertisers after the Chinese New Year celebrations. However, its TV segment’s revenue rose by 7% due to highly-rated programs. Coupled with lower direct costs as a result of the cancellation of its yearly carnival organised by TV3, the segment saw an increase of 73% in earnings.

Its digital segment saw a notable increase of 36% in revenue due to higher take-up rate of online advertisements, which subsequently narrowed the segment’s losses. The segment is expected to break even this year. We believe the performance of the TV segment will be sustained, as the major sporting events this year will prop up adex. Print media is expected to remain lacklustre as advertisers will allocate more budget for the TV segment ahead of the major events.

Going forward, MPR will continue to focus on growing its non-adex business, which is targeted to contribute 20%-30% (currently c.10%) to its bottom line in 3 years by monetising its over 70,000 hours worth of content, as well as growing its digital media business. The stock currently trades at 12x PE for FY14F, well within its historical PE band of 9x-15x.

Others :

Petronas Chemicals : Improved plant utilisation drive margins     HOLD

Boustead Heavy Ind : Persistent execution delays            HOLD

Economic Update : Improvements in external sector to spur growth

QUICK TAKE

MSM Malaysia : To build sugar refinery in Tanjung Pelepas?        HOLD

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Telekom Malaysia : Eyes high-speed broadband two launch this year

Fraser & Neave Holdings : Sees 8% to 10% growth, expects higher sales

CIMB Group Holdings : CIMB Thai cuts 2014 loan growth target

Steel Sector : Megasteel seeks six more years of protection

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The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.

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