Not the best time to tell a feel-good story
? While Media Prima has made all the right moves to turn around, we fear that
the heightening recessionary risks could eat into its bottomline’s growth.
? Therefore, we cut our FY22-24F EPS by 6-22% by reducing our assumptions
for the home shopping and TV divisions’ sales.
? Our TP falls from 96 sen to 51 sen, primarily as we lower our CY23F P/BV to
0.8x. This is to reflect the earnings growth risks under the current economy.
Recessionary fears can affect media companies, too
No matter how sound the strategic changes are and how disciplined Media Prima’s
management is about putting all its plans to work, we are wary about the impact of
increasing recessionary signs on the group’s earnings growth momentum.
MPTN’s ex-discounting factor ad sales shed 0.6% yoy in 4M22
The two areas that we are concerned about are its television ad sales and the Wow Shop
home shopping division. Since much of Media Prima’s turnaround has been anchored on
its TV ad sales, the 0.6% yoy drop in Media Prima Television Networks’s (MPTN) 4M22
ad expenditure (adex) prior to discounting factor prompts us to wonder if the economic
re-opening has failed to spur advertisers’ revenge spending throughout 2022. Of course,
the reduced 4M22 ad sales value could be due to advertisers saving up for the Eid
festivities, which fell in May 2022. And the ad value tabulated by Nielsen Malaysia does
not cover in-programme advertising and product placements, which MPTN is actively
doing with its primetime live programming. However, its advertising clients may have
been forced to rein in their overheads and advertising and promotion (A&P) budgets to
protect their margins in case the ringgit’s value erosion and goods’ price hikes persist as
the year progresses.
Heightening inflation could hit Wow Shop, in our view
Wow Shop fell into a net loss of RM4.6m in 1Q22 vs. a net profit of RM2.5m in 1Q21.
Complaints over the rising prices of food and everyday items all over social media cast
doubt on Wow Shop’s ability to bounce back in FY22F. Wow Shop focuses on
discretionary and big-ticket items that consumers will likely hold off from purchasing if
their daily expenses are eating up bigger chunks of their incomes.
Reiterate Add with lower TP of 51 sen
We cut our FY22-24F EPS by 6-22% as we dial down our assumptions for the home
shopping and TV divisions’ sales. We also lower our prescribed valuation for Media
Prima from 1.5x CY23F P/BV to 0.8x, the average when it was making core net losses
(FY17-1H20). We do this to reflect the earnings risks from a potential economic
downturn. Yet, after the 23.3% pullback in Media Prima’s share price since it announced
its 1Q22 results, our revised TP of 51 sen provides 17.2% potential upside. It also offers
handsome 5-7.2% CY22-24F yields. Hence, we retain our Add call. Downside risks: ad
and content sales plummet.