KUALA LUMPUR (April 6): AmInvestment Bank Research (AmResearch) has upgraded Media Prima Bhd to “buy” from “hold”, and revised its target price (TP) to 80 sen from 52 sen, as it sees advertising expenditure (adex) recovery and lower operating expenditure (opex) propelling the group’s growth.
The research house said in a note today its target price-earnings (P/E) is in line with that of Media Prima’s regional peers, which have a weighted-average forward P/E of 14 times.
The research house also raised its financial year ending Dec 31, 2021 (FY21) to FY23 forecasts by 93% to 207% for Media Prima (coming from a lower base of net profit forecasts) to account for better margins across the board due to lower opex moving ahead.
AmResearch said it is optimistic about Media Prima being a stronger recovery play in the media sector, given its strategies in home shopping and digital initiatives, and potential for Omnia to benefit strongly from the adex recovery, as well as potential benefits from better monetisation of its extensive reach across different segments.
After engaging with Media Prima’s management, AmResearch believes that the momentum of the group’s WOWSHOP is likely to be sustained post pandemic due to its digital transformation towards e-commerce mobile commerce (ECMC), driven by a multi-platform strategy. WOWSHOP recorded a net profit of RM10million for FY20 versus an RM11 million loss for the previous year.
The research house is also optimistic about Omnia’s potential due to positive feedback received from Media Prima clients thus far, and it is poised to benefit from further adex recovery due to expectations of better consumer sentiment following the gradual roll-out of Covid-19 vaccination and resumption of offline events.
“Since the easing of MCO (movement control order) restrictions, industry adex has been recovering continuously,” AmResearch said.
It also sees Media Prima’s free-to-air (FTA) TV exposure to benefit from the adex recovery.
“We believe that 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.
Meanwhile, the group conducted two phases of group-wide manpower rationalisation in 2020, reducing its workforce by 37% to 2,332 employees as at Dec 31, 2020.
“Its cost optimisation initiatives and strict cost controls during the Covid-19 pandemic led to the group achieving two profitable quarters despite the weaker adex impacted by Covid-19 and various MCO measures enforced, which dragged revenue lower,” the research house said, adding that Media Prima’s FY20 overheads were reduced by 24% year-on-year (y-o-y).
AmResearch also believes that the company’s cost-saving initiatives will continue to boost its operational efficiency moving forward.
At 10.18am today, Media Prima had fallen half a sen or 0.76% to 65.5 sen, valuing the group at RM698.79 million.
