RAM Ratings reaffirms Media Prima’s ratings

Published on 24 July 2015

RAM Ratings has reaffirmed Media Prima Berhad’s (Media Prima or the Group) corporate credit ratings and the ratings of its RM500 million CP/MTN Programme (2012/2019) at AA1/Stable/P1.

The reaffirmation of the ratings is premised on a stronger balance sheet that has enabled the Group to weather an unprecedented year; the Group remained in a net-cash position. After calamitous events in 2014 that had severely suppressed consumer sentiment – 3 flight tragedies and the flood disaster in Kelantan – Media Prima turned in a weak performance y-o-y across key divisions (TV and print). For the full year, its revenue contracted 12.5% y-o-y to RM1.51 billion. Excluding a mutual-separation-scheme cost of RM79.80 million, the drop in revenue had led to a steeper 23.6% y-o-y decline in operating profit before depreciation, interest and tax (OPBDIT), given that most of Media Prima’s costs are fixed.

In 1Q FY Dec 2015, the Group’s top line fell 6.2% y-o-y to RM329.39 million on weaker revenue contributions from all key divisions, save the outdoor segment. Correspondingly, its OPBDIT shrunk 9.5%. The advertising expenditure (adex) deluge anticipated by advertisers in 1Q FY Dec 2015 never quite materialised, with the beneficiaries of adex growth (non-discounted) being the pay-TV (+26.3%) and in-store media (+17.6%) segments. Intense competition within the adex industry had also contributed to a poor performance.

The Group retained its net-cash position as at end-March 2015, backed by a lighter debt load. Despite airline and flood disasters in 2014, Media Prima continued to demonstrate a strong cashflow-generating ability, with about RM230 million in funds from operations (FFO, excluding the one-off MSS). Still, the Group’s adjusted FFO debt coverage would have come up to 0.41 times for FY Dec 2014, short of our expectation of about 0.50 times (FY Dec 2013: 0.52 times). “Looking ahead, we expect a flattish performance, with Media Prima’s FFO debt cover anticipated to come in at 0.35 times in FY Dec 2015 before increasing to a range of around 0.40-0.45 times. The Group is envisaged to retain its net-cash position, whilst planned capex is expected to be sufficiently funded by internal cash,” said Kevin Lim, RAM’s Head of Consumer and Industrial Ratings.

The ratings continue to be supported by Media Prima’s strong market position in the media industry, its standing as a diversified media conglomerate, the Group’s robust balance sheet, strong cashflow-generating ability and solid liquidity profile. Given its multimedia-platform capabilities such as free-to-air (FTA) TV broadcasting, newspaper publication, radio broadcasting, outdoor advertising, content creation and online portals, the Group is not dependent on any single source of revenue.

The ratings are, however, moderated by the rise of digital media. In tandem with global trends, traditional media platforms (print, TV and radio) are under siege from the rising prominence of digital media. “The digital age has propelled the importance of digital media as a popular, affordable advertising platform to reach out to the younger generation,” adds Lim. Furthermore, changing consumer habits and preferences also impact the way in which advertisers allocate ad dollars. Additionally, Media Prima may be affected by future competition stemming from the freeing up of FTA TV space. The Group’s performance is further susceptible to economic cycles and newsprint-price volatility.

Media contact
Sahil R Kamani
(603) 7628 1084
sahil@ram.com.my