Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Research House: RHB
Media Prima Bhd
(Dec 16, RM2.36)
Maintain outperform at RM2.32 with fair value RM2.82: Concerns have been raised over the declining trend in TV viewership for Media Prima's channels. On the whole, its viewership market share has fallen to 46% this year, compared with 50% in 2009, on the back of lower TV viewership share for TV3, NTV7 and TV9. According to management, the decline in viewership is partly due to fragmentation as Astro continues to increase the number of channels on its platform. In mitigation, while management believes advertisers will continue to pay attention to TV viewership numbers, it also thinks Media Prima's channels offer better value for advertisers, given the concentration of viewership over its four channels as opposed to Astro's over 100 channels. Hence, Media Prima's channels offer better value for money for advertisers to reach out to viewers. Nevertheless, as fragmentation continues Media Prima is actively repositioning itself as a content provider, allowing users to access its content via multiple platforms (for example tonton.com.my and Telekom Malaysia Bhd's UniFi).
If the general election is held next year, we think this will boost government ad spending. Recall that in March 2008, gross adex for both TV and print media jumped 24% year-on-year (y-o-y) with TV adex up 37.3% y-o-y while adex for print media recorded y-o-y growth of 17.5%. Within the print media segment, New Straits Times' gross adex for March 2008 rose 41% y-o-y while The Star and Media Chinese International Ltd's (MCIL) adex rose 2.1% y-o-y and 12.2% y-o-y respectively.
Both Media Prima's outdoor and radio segments continue to grow. Typically, adex for the outdoor segment has lagged the economic cycle due to its concession-based nature. Thus, earnings for the outdoor segment could potentially see a pick-up next year. After stripping out the new acquisition of Kurnia Asia Bhd, the outdoor division recorded a 15% y-o-y growth. Its radio segment also recorded a decent 17% y-o-y growth in terms of top line, while the division recorded 14% bottom line growth y-o-y due to higher direct costs during the year.
The risks include: (i) weaker than expected adex growth; (ii) high discounting activities; and (iii) high foreign shareholding level (circa 31.7%).
We maintain our earnings forecasts for now.
Our indicative fair value is maintained at RM2.82, based on CY11 price-earnings ratio of 16 times. We reiterate our 'outperform' call on the stock. ' RHB Research Institute, Dec 16
This article appeared in The Edge Financial Daily, December 17, 2010.
Company Name: MEDIA PRIMA BHD
Research House: RHB
Media Prima Bhd
(Dec 16, RM2.36)
Maintain outperform at RM2.32 with fair value RM2.82: Concerns have been raised over the declining trend in TV viewership for Media Prima's channels. On the whole, its viewership market share has fallen to 46% this year, compared with 50% in 2009, on the back of lower TV viewership share for TV3, NTV7 and TV9. According to management, the decline in viewership is partly due to fragmentation as Astro continues to increase the number of channels on its platform. In mitigation, while management believes advertisers will continue to pay attention to TV viewership numbers, it also thinks Media Prima's channels offer better value for advertisers, given the concentration of viewership over its four channels as opposed to Astro's over 100 channels. Hence, Media Prima's channels offer better value for money for advertisers to reach out to viewers. Nevertheless, as fragmentation continues Media Prima is actively repositioning itself as a content provider, allowing users to access its content via multiple platforms (for example tonton.com.my and Telekom Malaysia Bhd's UniFi).
If the general election is held next year, we think this will boost government ad spending. Recall that in March 2008, gross adex for both TV and print media jumped 24% year-on-year (y-o-y) with TV adex up 37.3% y-o-y while adex for print media recorded y-o-y growth of 17.5%. Within the print media segment, New Straits Times' gross adex for March 2008 rose 41% y-o-y while The Star and Media Chinese International Ltd's (MCIL) adex rose 2.1% y-o-y and 12.2% y-o-y respectively.
Both Media Prima's outdoor and radio segments continue to grow. Typically, adex for the outdoor segment has lagged the economic cycle due to its concession-based nature. Thus, earnings for the outdoor segment could potentially see a pick-up next year. After stripping out the new acquisition of Kurnia Asia Bhd, the outdoor division recorded a 15% y-o-y growth. Its radio segment also recorded a decent 17% y-o-y growth in terms of top line, while the division recorded 14% bottom line growth y-o-y due to higher direct costs during the year.
The risks include: (i) weaker than expected adex growth; (ii) high discounting activities; and (iii) high foreign shareholding level (circa 31.7%).
We maintain our earnings forecasts for now.
Our indicative fair value is maintained at RM2.82, based on CY11 price-earnings ratio of 16 times. We reiterate our 'outperform' call on the stock. ' RHB Research Institute, Dec 16
This article appeared in The Edge Financial Daily, December 17, 2010.
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