AmBank Research accords “buy” upgrades to Media Prima and Star Media

HAVING been in limbo for quite a while, media sector enthusiasts would be pleased to learn that AmBank Research has today upgraded two media stocks, namely Media Prima Bhd and the Star Media Group Bhd.

The research house upgraded Media Prima to “buy” (from “hold” previously) with a higher fair value of 80 sen/share pegged to an FY2022F price-to-earnings ratio (PE) of 14 times (previously 52 sen/share pegged to a price-to-book ratio [PB] of 1 time).

As for Star Media, AmBank Research has upgraded the company to “buy” from “underweight” with a higher fair value of 53 sen/share after pegging the stock to a higher PB of 0.5 times (previously 27 sen/share pegged to a PB of 0.25 times).

For Media Prima, AmBank Research expects improvement in efficiencies and cost optimisation to continue.

To re-cap, Media Prima had conducted two phases of group-wide manpower rationalisation in 2020, reducing its workforce by 37% to 2,332 employees as of Dec 31 last year.

“Its cost optimisation initiatives and strict cost controls during the COVID-19 pandemic has led to the group achieving two profitable quarters despite the weaker adex impacted by COVID-19 and various MCO (movement control order) measures enforced which dragged revenues lower,” justified the research house.

“FY20 overheads were reduced by 24% year-on-year compared to 2019. We believe that its cost-saving initiatives will continue to boost MPR’s operational efficiency moving forward.”

On the overall, AmBank Research is optimistic on Media Prima being a stronger recovery play in the media sector given its (i) strategies in home shopping and digital initiatives; and (ii) potential for Media Prima Omnia Sdn Bhd to benefit strongly from adex recovery as well as potential benefits from better monetisation of its extensive reach across different segments.

With regard to Star Media, the research house foresees improvement of prospects following the cessation its video-on-demand (VOD) platform Dimsum Entertainment’s operations by September 2021.

“While we are still cautious on Star Media’s prospects due to the lack of diversification from traditional media segments, we anticipate the performance of its print, radio, and events segment to recover following an improved consumer sentiment leading to recovery in adex as the country has begun its COVID-19 vaccination rollout,” AmBank Research pointed out.

“As of Dec 31, the group’s net cash per share stood at 48 sen/share.”

At the close of today’s morning session, Media Prima was down 0.5 sen or 0.76% to 65.5 sen with 2.91 million shares traded (valuing the company at RM727 mil) while Star Media was unchanged at 42.5 sen with 1.42 million shares traded (valuing the company at RM314 mil). – April 6, 2021

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