RAM Ratings has upgraded the long-term ratings of Media Prima Berhad’s (Media Prima or the Group) Corporate Credit Rating (CCR) and its RM500 million CP/MTN Programme (2012/2019) from AA2 to AA1.

Published on 06 August 2014

RAM Ratings has upgraded the long-term ratings of Media Prima Berhad’s (Media Prima or the Group) Corporate Credit Rating (CCR) and its RM500 million CP/MTN Programme (2012/2019) from AA2 to AA1. The outlook on the ratings has been revised from positive to stable. Meanwhile, we have reaffirmed the short-term ratings of both the Group’s CCR and CP/MTN at P1.
“The upgrade of Media Prima’s long-term ratings is premised on improvement in its financials to levels which are comparable to that of its AA1-rated peers,” notes Kevin Lim, RAM’s Head of Consumer & Industrial Ratings. The Group has been in a net-cash position since end-December 2013 despite a relatively flat operating performance. “While the impending rollout of Digital Terrestrial Broadcasting (DTTB) is expected to result in further fragmentation of viewership, we are of the view that Media Prima is unlikely to be significantly affected in the short- to medium-term, given its entrenched position in the free-to-air (FTA) TV sector,” Lim adds.
The Group’s balance sheet has steadily improved, placing it in a net-cash position as at end-December 2013. Media Prima’s cashflow-protection measures have been robust, with the Group generating around RM300 million of funds from operations (FFO) annually, translating into an average FFO debt cover of 0.50 times over the past 4 years. “Looking ahead, Media Prima’s FFO debt cover is anticipated to remain at current levels of around 0.5 times. The Group is envisaged to maintain its net cash position, whilst planned capex is expected to be sufficiently funded by internal cash,” Lim said.
Media Prima’s top line inched up 1.5% to RM1.72 billion in fiscal 2013 as the Group attracted more non-traditional advertisers on all fronts, save for its print division. However, investment in content and higher printing costs led to its OPBDIT dropping 2.9% to RM370.62 million. The Group’s pre-tax profit, on the other hand, grew 2.4% to RM289.98 million, chiefly due to other income from the sale of programme rights and debt recovery for a subsidiary.
In 1Q Dec FY 2014, the MH 370 flight incident had dampened the overall consumer sentiment. Coupled with a seasonally weak quarter, the weaker top lines of Media Prima’s print (-15.1%) and outdoor (-6.9%) divisions resulted in a 4.1% and 4.7% y-o-y reduction in group revenue and OPBDIT, respectively. Going forward, the outlook of the adex sector is expected to be challenging for FY 2014. Nevertheless, the Group’s financials are anticipated to remain resilient.  
The ratings reflect Media Prima’s strong market position within the media industry, its standing as a diversified media conglomerate and its solid financial profile. Given its multimedia-platform capabilities such as 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, however, remain moderated by growing competition throughout the industry, which has been exacerbated by the emergence of new media platforms such as online news portals and new channels via broadband-based TV services. Further, the substantial addition of more channels by the freeing up of FTA TV airspace via DTTB (expected rollout by 4Q this year) may lead to further fragmentation of viewership and adex, altering the fundamentals of the industry. Media Prima’s performance is also susceptible to economic cycles.

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