ALTHOUGH Media Prima Bhd – the bellwether media stock – returned to the black for its 1Q FY2021, this is still deemed as below expectations as more bullish advertising revenue was expected from the country’s largest media and entertainment company.
For the financial quarter under review, the company which is synonymous with the once popular TV3 channel posted a profit after tax and minority interests (PATAMI) of RM5.3 mil from a loss of RM29.54 mil during the same period a year ago.
“We expect the group’s 2Q FY2021 earnings to be similar sequentially as advertisers remain cautious in their spending in view of the imposition of movement control order (MCO 3.0),” opined analyst Syifaa’ Mahsuri Ismail in a results review.
“Despite operating in a soft adex (advertising expenditure) environment, we are comforted that the group remains profitable in 1Q 2021.”
Against the backdrop of results shortfall, HLIB Research lowered its FY2021/FY2022 core PATAMI by 54.1%/30.8% to RM29.6mil/RM58 mil.
All-in-all, the research house downgraded Media Prima to “hold” from “buy” with a reduced target price of 61 sen (from 66 sen previously) following earnings adjustments.
“Following the share price run up (+129.8% year-to-date), we believe that the stock is currently fairly valued,” noted HLIB Research.
Nevertheless, the research house expects Media Prima to be able to weather through this near term headwind with its leaner cost structure as well as support from the home shopping segment amid the soft adex environment.
Elsewhere, Kenanga Research also downgraded Media Prima to “market perform” (from “outperform”) with a lower target price of 69 sen (previously 75.5 sen) as it trimmed earnings by -30%/-17% for FY2021E/FY2022E respectively to account for the drop in earnings.
“Our target is based on an unchanged 2.4 times FY2022E P/NTA (price-to-net tangible asset) which is +1SD (standard deviation) above the group’s three-year mean,” justified analyst Pritika Modhgil.
“We attribute the above-mean valuation to the group staying profitable going forward due to the bright outlook on its ad sales, content distribution and home-shopping segment as well as successful cost optimisation executed in FY2020.”
At the close of today’s morning session, Media Prima was down 8 sen or 12.21% to 57.5 sen with 6.41 million shares traded, thus valuing the company at RM638 mil. – May 28, 2021
