Media Prima’s 1H21 recorded a core PATAMI of RM19.9m (1H20: -RM45.8m). The results was above our and consensus expectations, accounting for 67.2% and 73.7% of the full year forecasts respectively. The results beat was mainly due to stronger-than-expected advertising revenue. In view of the results beat, we increase our FY21 earnings by 17.1%. Maintain BUY with an unchanged TP of RM0.61 pegged to unchanged P/B multiple of 1.0x based on FY22 BVPS.

Above expectations. Media Prima’s 2Q21 core PATAMI of RM14.6m (QoQ: +1.8x; 2Q20: -RM5.6m) brought 1H21’s sum to RM19.9m (1H20: -RM45.8m). The results was above our and consensus expectations, accounting for 67.2% and 73.7% of the full year forecasts, respectively. The results beat was mainly due to stronger-than expected advertising revenue. 1H21 core PATAMI is computed after adjusting for (i) net impairment charge (+RM1.7m); (ii) foreign exchange loss (+RM46k); (iii) inventories written back (-RM26k); and (iv) gain on disposal of PPE (-RM444k).

Dividend. None (2Q20: none). 1H21: none (1H20: none).

QoQ. Revenue increased 14.9% mainly due to higher advertising revenue (+23.9%) and content sales (+41.3%) which more than offset the decline in home shopping sales (-1.8%). The increase in advertising revenue was partially due to the higher adex spending for the Hari Raya festive season. In line with this, the group recorded core PATAMI of RM14.6m (vs RM5.3m or +1.8x).

YoY. Revenue increased 23.8% mainly due to higher advertising revenue (+43.1%) which more than offset the decline in home shopping sales (-14.9%). In turn, the group recorded core PATAMI of RM14.6m (vs -RM5.6m SPLY).

YTD. Revenue increased 15.2% mainly due to higher advertising revenue (+21.6%) which more than offset the decline in newspaper sales (-21.6%). Coupled with lower operating expenses, the group recorded core PATAMI of RM19.9m (vs -RM45.8m SPLY).

Outlook. We are pleasantly surprise that despite the imposition of lockdown restrictions during the quarter, the group’s earnings remained resilient supported by an improvement in its advertising revenue. We opine that this strong showing is due to its effective advertising solution through OMNIA which provides an integrated advertising solution that cross sell across its different platforms to its customers. Besides this, Media Prima also plans to invest in new studios to cater to its growing content production requirements. We see growth potential in this segment as Media Prima continues to expand its content sales to OTTs and foreign broadcasters. We also do not discount the possibility of Media Prima launching its own OTT app to tap into the OTT market.

Forecast. In view of the results beat, we increased our FY21 earnings by 17.1%.

Maintain BUY with an unchanged TP of RM0.61 pegged to unchanged P/B multiple of 1.0x based on FY22 BVPS. We believe that Media Prima’s future earnings growth will be supported by its stronger adex sales through its integrated advertising solution OMNIA, its growing content sales, home shopping and digital segments.

Source: Hong Leong Investment Bank Research - 27 Aug 2021