by NUR HAZIQAH A MALEK / pic by TMR FILE
MEDIA Prima Bhd is expected to gain from its streamlining initiatives, as the company returned to the black with a net profit of RM12.43 million in its third quarter ended Sept 30, 2020 (3Q20).
Hong Leong Investment Bank Bhd analyst Syifaa’ Mahsuri Ismail has upgraded the counter to ‘Buy’ with a target price of 26 sen on the improved financial performance.
“The year-to-date (YTD) core loss of RM29.6 million came in better than ours or consensus’ loss forecasts of RM48.3 million to RM60.9 million for the financial year (FY20).
“This was accomplished on the back of the rise in top line on year-on-year (YoY) and quarter-on-quarter (QoQ) basis, coupled with the cost savings measures that have helped bolster its bottom line,” she stated in a research note yesterday.
The analyst is positive on the group’s outlook as its advertisement expenditure (adex) is showing a slight uptick on the back of the economy reopening.
“We opine this was due to advertisers ramping up engagement in tandem with the relaxation of Movement Control Order (MCO) measures.
“We gather from the management that despite the reintroduction of Conditional MCO across most of Malaysia, adex numbers have been resilient due to the group’s initiative in ramping up their integrated advertising solutions and producing more advertising content,” she said.
Media Prima’s business transformation exercise has proven to bear fruit and analysts are hopeful the improvement will persist, while subsequently defending the group’s bottom line.
“We revise FY20, FY21 and FY22 forecasts upward from net loss of RM48.3 million, RM15.8 million and net profit of RM10.2 million respectively to net loss of RM25.9 million, to net profit of RM7.7 million and RM27.1 million after factoring higher revenue and lower operating expenditure,” she said.
Despite the challenging outlook in the media industry, she is encouraged by the group initiative in streamlining its operations and proactively improving its integrated advertising solutions.
RHB Investment Bank Bhd analysts Jeffrey Tan and Eddy Do Wey Qing upgraded Media Prima to ‘Buy’, with a new target price of 31 sen from 22 sen, marking a 72% upside.
“The pivot to an integrated adex model (Omnia) should drive stronger adex gains going forward, as the group capitalises on its extensive platform reach. We expect a return to the path of profitability in FY21 with its cost base significantly right-sized,” the research house noted.
Media Prima’s Omnia segment posted a revenue of RM124.3 million during the quarter and delivered a profit after tax of RM23. 7 million together with the broadcasting division.
The RHB analysts said the media group’s core profit in the 3Q swung back to black at RM12.4 million with cost-down initiatives driving its earnings before interest, taxes, depreciation and amortisation growth.
“3Q20 advertising expenditure recovered, up 27% QoQ, while marking a YoY decline of 7%.
“This follows the implementation of the Recovery MCO from June 10. Digital adex expanded 9% QoQ (-14% YoY), albeit with contribution remaining small at lower than 10% of consolidated revenue,” the research house stated.
It noted, however, while the company is being supported by stronger digital adex, there are still risks.
“Key risks include the economic fallout from Covid-19 which may severely impact adex and consumer sentiment, prohibitive overheads, and execution,” it added.
Media Prima’s share price closed 5.56% or one sen higher at 19 sen yesterday, giving it a market valuation of RM210.75 million.