Media Prima set to gain profit due to lower opex, adex


MEDIA Prima Bhd is poised to record growth in profit on the back of lower operating expenditure (opex) and recovery from digital advertising expenditure (adex).

In a research note yesterday, AmBank Research recommended a ‘Buy’ call on the media company with a fair value (FV) of 80 sen per share pegged to its financial year 2022 (FY22) price-to-earnings (PE) ratio of 14 times.

Its FV stood at 52 sen per share previously pegged to price-to-book ratio of one time.

“Our target PE is in line with that of its regional peers, which have a weighted-average forward PE of 14 times.

“We have also reflected a 3% premium to its share price to reflect a four-star environment, social and governance rating as appraised by us,” it said.

The research house raised its FY21 to FY23 forecasts for Media Prima by 93% to 207% to account for better margins across the board due to its lower opex moving forward.

Based on AmBank Research’s recent engagement with Media Prima, it stated that the media group’s home shopping momentum will continue post-pandemic with the group’s fully acquired home shopping business, Wowshop.

Wowshop contributed 30% of the group’s revenue as sales grew by 33% year-on-year due to a shift in consumer spending habits towards e-commerce mobile commerce (ECMC) platforms and higher viewership particularly, during the Movement Control Order.

“We believe the momentum of Wowshop is likely to be sustained post-pandemic due to its digital transformation towards ECMC, driven by a multiplatform strategy. Wowshop has 2.3 million registered customers where 33% of them are new customers secured in 2020,” it said.

Media Prima’s rebranding of Media Prima digital and REV Asia as Rev Media Group in July last year is expected to further streamline business processes and realise future synergies.

Media Prima’s free-to-air (FTA) TV exposure would also benefit from adex recovery. FTA TV contributions rose 62% last year overtaking newspapers as the main contributor to the adex market in recent years.

“We believe Media Prima’s 35.7% command of audience share in the FTA TV market bodes well for the group as it is primed to benefit from a recovery in adex due to its bigger share of the market particularly for TV3 and 8TV,” it said.

The research house also upgraded its recommendation for Star Media Group Bhd to ‘Buy’ from ‘Underweight’ previously with a higher FV of 53 sen per share after pegging to a higher PB of 0.5 time as it believed the group’s prospects would improve following the cessation of its video-on-demand platform Dimsum Entertainment by September this year.

AmBank Research projected Star Media to post narrower losses for FY21 and FY22 and to make a profit in FY23 on the back of better margin assumptions for the print and digital segments following Dim-sum Entertainment’s cessation.

“The decision to wind down Dimsum Entertainment’s operations was made following a strategic review by Star Media’s management team as it had identified new opportunities to explore instead. The team will be redeployed to work on the group’s current and new projects in the pipeline,” it said in a separate note.

The platform was launched in November 2016 and provided Asia-centric content to 1.1 million subscribers as at Dec 31, 2019.

Dimsum Entertainment was also available in Singapore and Brunei under the group’s regional expansion plan.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) maintained its ‘Hold’ call on Star Media with a TP of 45 sen following Dimsum Entertainment’s cessation which would help reduce the group’s losses.

HLIB also remained its forecast for the group for FY21 as the termination will only be completed in the third quarter of 2021.

“Following the anticipated cost savings from this exercise, our FY22 loss forecast narrows to -RM19.4m from -RM29.2m previously,” it said.

It added that Star Media recorded a core net loss of RM70.3 million last year and was in need of a major business restructuring and cost optimisation to remain sustainable in the long term.

“We view this move by the group as a good start in its restructuring and cost optimisation efforts. The recent changes in the senior management of the group could potentially bring fresh perspective to the group’s business and may be able to drive it in a new business direction,” it said.