Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Research House: ECMLIBRA
Media Prima Bhd
(May 20, RM2.03)
Maintain buy at RM2.09 with target price of RM2.68: Media Prima recorded 1QFY10 core net profit of RM28 million. This is a huge reversal in fortune from the 1QFY09 core net loss of RM9.9 million.
The 1QFY10 core net profit was above expectations at 19% of our full-year estimate. Historically, 1Q core net profit comprised 10% to 15% of full-year core net profit due to seasonally lower adex (advertising expenditure) spend.
1QFY10 revenue of RM323.7 million was also above expectations at 23% of our 2010 estimate. Historically, 1Q revenue comprised 15% to 20% of full-year revenue.
The outperformance was due to TV net adex which surged 32% year-on-year (y-o-y), ahead of our 7.5% forecast for the whole of 2010, due to the recovering economy and maiden contributions from 90% owned, The New Straits Times Press (Malaysia) (NSTP).
Due to the relatively fixed costs nature of its businesses, the incremental revenue caused earnings before interest, tax, depreciation and amortisation (Ebitda) margins to surge 16 percentage points y-o-y to 23%. Save for new media, every segment recorded higher earnings y-o-y.
As expected, 1QFY10 core net profit was 20% lower quarter-on-quarter due to seasonally lower adex spend. While we are pleased with the 1QFY10 results, to err on the side of caution, we maintain our earnings estimates for now.
Given the bright consumer and adex sentiment, Media Prima's earnings are poised to recover strongly this year. We forecast 2010 EPS (earnings per share) to surge by 57% y-o-y.
The exit offer to the remaining shareholders owning 10% of NSTP will close in August 2010, and NSTP will be delisted in September 2010. Recall that the exit offer is based on terms similar to the voluntary general offer (1.2 Media Prima shares and 0.2 Media Prima warrant for every 1 NSTP share). We continue to assume that Media Prima will own 100% of NSTP by year-end.
Our RM2.68 target price is premised on 18 times one-year forward PE (price-to-earnings), which is the average since listing. Our valuation methodology is reinforced with the fact that Media Prima was trading at 17 times to 21 times one-year forward PE when consumer sentiment was strong during the 'heady' 2007 to 1H08 period.
Consumer sentiment has since recovered to those levels. Therefore, Media Prima should at least trade at historical average valuations. ' ECM Libra Investment Research, May 20
This article appeared in The Edge Financial Daily, May 21, 2010.
Company Name: MEDIA PRIMA BHD
Research House: ECMLIBRA
Media Prima Bhd
(May 20, RM2.03)
Maintain buy at RM2.09 with target price of RM2.68: Media Prima recorded 1QFY10 core net profit of RM28 million. This is a huge reversal in fortune from the 1QFY09 core net loss of RM9.9 million.
The 1QFY10 core net profit was above expectations at 19% of our full-year estimate. Historically, 1Q core net profit comprised 10% to 15% of full-year core net profit due to seasonally lower adex (advertising expenditure) spend.
1QFY10 revenue of RM323.7 million was also above expectations at 23% of our 2010 estimate. Historically, 1Q revenue comprised 15% to 20% of full-year revenue.
The outperformance was due to TV net adex which surged 32% year-on-year (y-o-y), ahead of our 7.5% forecast for the whole of 2010, due to the recovering economy and maiden contributions from 90% owned, The New Straits Times Press (Malaysia) (NSTP).
Due to the relatively fixed costs nature of its businesses, the incremental revenue caused earnings before interest, tax, depreciation and amortisation (Ebitda) margins to surge 16 percentage points y-o-y to 23%. Save for new media, every segment recorded higher earnings y-o-y.
As expected, 1QFY10 core net profit was 20% lower quarter-on-quarter due to seasonally lower adex spend. While we are pleased with the 1QFY10 results, to err on the side of caution, we maintain our earnings estimates for now.
Given the bright consumer and adex sentiment, Media Prima's earnings are poised to recover strongly this year. We forecast 2010 EPS (earnings per share) to surge by 57% y-o-y.
The exit offer to the remaining shareholders owning 10% of NSTP will close in August 2010, and NSTP will be delisted in September 2010. Recall that the exit offer is based on terms similar to the voluntary general offer (1.2 Media Prima shares and 0.2 Media Prima warrant for every 1 NSTP share). We continue to assume that Media Prima will own 100% of NSTP by year-end.
Our RM2.68 target price is premised on 18 times one-year forward PE (price-to-earnings), which is the average since listing. Our valuation methodology is reinforced with the fact that Media Prima was trading at 17 times to 21 times one-year forward PE when consumer sentiment was strong during the 'heady' 2007 to 1H08 period.
Consumer sentiment has since recovered to those levels. Therefore, Media Prima should at least trade at historical average valuations. ' ECM Libra Investment Research, May 20
This article appeared in The Edge Financial Daily, May 21, 2010.
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