A good start to a better year
? 1Q22 core net profit was RM6m, within expectation at 8% of our FY22
forecast as we expect the bulk of its earnings to come in 2Q and 4Q.
? Content sales surged 112.3% yoy in 1Q22, with the business instrumental in
pushing up its broadcasting segment’s net profit by 128.8% yoy.
? As the 2022 Eid was the first in three years not observed in lockdowns, we
expect stronger yoy and qoq ad sales in 2Q22F. Reiterate Add.
1Q22 core net profit within our expectation
Media Prima posted a 1Q22 core net profit of RM6m. While this made up only 8% of our
and Bloomberg consensus FY22F estimates, it is within our expectation as Media
Prima’s earnings have become seasonally concentrated in the Ramadan and Eid months
(which fell in 2Q this year) and in 4Q – where advertisers go trigger-happy to capitalise
on the festivities. For perspective, the group’s 1Q21 core net profit accounted for just 7%
of its FY21 earnings. What is undoubtedly a positive from 1Q22’s set of numbers is the
22% yoy growth in its core net profit, despite a 2.8% yoy dip in its 1Q22 revenue. Media
Prima’s bread-and-butter businesses, content and advertising sales, vaulted 14.5% and
112.3% yoy, respectively. What pulled down Media Prima’s 1Q22 turnover yoy were its
Wow Shop home-shopping unit and 98.2%-owned The New Straits Times Press (M) Bhd
(Unlisted). It is understandable that the latter is on a precipitous decline given the
structural shift in the reading habits of Malaysian consumers to the less-lucrative online
media. We are of the view that Wow Shop will take time to turn around as the average
Malaysian has just started to pick themselves up from the economic ravages of the
Movement Control Order (MCO) in 2020-10M21.
What could push up Media Prima’s 2Q-4Q22F earnings
We are excited about what lies ahead for Media Prima’s earnings. While we expect the
advertising market to turn hyper-competitive with the surge in inflation in 2022, we believe
the spoils of war will go to TV broadcasters because audio-visual media can better retain
audiences’ attention. As the Eid in 2022 was the first since the outbreak of Covid-19 not
observed in a lockdown, the expectation is that Malaysian-Muslims went all out to
celebrate the festival, giving advertisers the incentive to binge-spend on ads. There was
also a special Employees Provident Fund RM10,000 withdrawal scheme in Apr 2022,
which may have helped lift Media Prima’s home-shopping sales. If losses narrowed in
segments that underperformed in 1Q22, this could help Media Prima shrink its 2Q22F
effective tax rate from the whopping 63.7% in 1Q22 (1Q21: 56.8%).
Reiterate Add
We believe Media Prima’s turnaround is only just beginning as some of its segments
need time to rebound after the lockdown. Its content sales also have more upside, in our
view, with more streaming services gunning for local content. Our 96 sen TP values the
stock at 1.5x CY23F P/BV, or 2 s.d. above the average when it was recording core net
losses in CY17-1H20. Downside risks: ad sales petering out and content sales faltering.