Kenanga upgrades Media Prima to “outperform”; one-fold hike in target price

HAVING turned a new leaf with more viewership and advertising slots, optimism seems to be in the air for Media Prima Bhd which is synonymous with the once popular TV3 channel.

This has prompted Kenanga Research to upgrade the country’s largest media and entertainment company by two rungs to “outperform” (from “underperform” previously) while adjusting its target price upward by 107% to 75.5 sen (from 36.5 sen).

“By rebranding ntv7 to an educational channel, Didik TV – a collaboration with the Education Ministry MoE – we believe Media Prima’s lowest viewing channel may gain traction, thus bumping up its viewership,” opined analyst Pritika Modhgil in a company update.

“With higher viewership, the said channel will be able to secure more ad sales thus increasing ad revenue for the group.”

Additionally, the revenue gained via the production fees charged to the MoE will be parked under Omnia which collaboration began in February 2021, hence further bumping up Omnia’s revenue from 1Q FY2021 onwards.

Elsewhere, Kenanga Research is also optimistic on Media Prima’s recent teaming up with leading over-the-top (OTT) providers, namely WeTV (Nov 26 last year) and and iQiYi (March 23 to offer local content to viewers across Asia which is in line with its digital expansion strategy.

“Both partnerships entail the group (i) to license out their programmes to the OTTs, thus enabling them to stream these contents on their respective platforms, and (ii) allow the group to sell advertising slots in the digital space solely on their licensed contents,” noted Kenanga Research.

“With that said, this opens up another avenue for the group to sell ad slots as more titles licensed out to these OTTs will result in more ad slots available for the group to sell.”

Moreover, the research house also observed that adex (advertising expenditure) is gradually recovering with free-to-air (FTA) TV being the only traditional adex platform seeing an uptick of 1.35% year-on-year (yoy) based on Nielson’s 4QCY20 adex data whereas other traditional platforms plunged yoy (eg newspapers [-42%], radio [-26%]).

“This implies that FTA TV is the most resilient among them and with work-from-home arrangements giving other traditional platforms a run for their money, this could potentially benefit the FTA TV and digital segments the most,” projected Kenanga Research.

“The group also command a lion’s share of FTA TV adex at 77%; hence we believe Media Prima will benefit the most from adex recovery moving forward.”

At 3pm, Media Prima was unchanged at 62.5 sen with 1.94 million shares traded, thus valuing the company at RM693 mil. – April 16, 2021

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