HAVING posted a positive surprise in its latest financial results, there is now hope that a turnaround is imminent for loss-making Media Prima Bhd.
Despite the challenging operating environment, AmBank Research believes that Media Prima’s commerce and digital propositions will continue to gain traction as well as are able to cushion declines in traditional advertising expenditure (adex) and circulation.
“The group has seen increased demand for digital advertising and advertiser content under Omnia, and with the strong performance of its WOWSHOP, Media Prima will continue to enhance users’ home shopping experience,” noted AmBank Research in a results review.
“The group will also continue to improve its operational efficiencies ahead in order to optimise its costs.”
According to AmBank Research, Media Prima posted a core profit of RM16 mil in its 3Q FY2020 (vs RM6 mil core loss in the previous quarter) even after the exclusion of a larger exceptional loss in 2Q FY2020 (due to the termination benefits charge incurred during the quarter) on higher revenue and disciplined cost optimisation.
Basically, the company’s 3Q FY2020 revenue rebounded by 14% following easing of the movement control order (MCO) restrictions with the enforcement of the recovery MCO since June 10, mainly driven by a recovery in broadcasting adex (advertising expenditure).
Moving forward, AmBank Research has also narrowed its FY2020F–2022F loss projection on Media Prima amid better margin assumptions across the board following realisation of cost savings and better-than-expected recovery post-MCO.
All-in the research house upgraded Media Prima’s rating to “buy” (from “hold” previously) with a higher fair value of 25 sen/share pegged to a higher price-to book (PB) ratio of 0.5 times (previously 22 sen /share with PB of 0.4 times) after reflecting the group’s latest 3Q FY2020 book value per share of 50 sen.
“The higher PB ratio is premised upon our belief that the group is seeing benefits from its previous Odyssey transformation plan to grow commerce and digital revenues,” opined the research house.
“Coupled with its new Omnia proposition for bundling advertising-related solutions as well as benefits seen from its cost optimisation initiatives, we believe that the stock is undervalued at the current price.”
Meanwhile, Public Investment Bank Research maintained its “neutral” rating on Media Prima but adjusted its target price to 21 sen (from 19 sen previously) on account that advertisers are likely to remain prudent given the current sluggish economic conditions.
“Moving forward, Media Prima will continue to focus on its integrated advertising solutions given the increase in client engagement in its digital advertising and advertiser content,” noted analyst Wong Ling Ling.
“However, in light of the subdued adex environment as advertisers remain cautious on advertising budget, we expect Media Prima’s earnings to remain lackluster, albeit being partially mitigated by its cost saving measures. “
At 11.07am, Media Prima was up 1 sen or 5.56% at 19 sen with 29.01 million shares traded, thus valuing the company at RM211 mil. – Nov 19, 2020
