For the financial quarter ended June 30 (Q6 FY2023), the group registered a net profit of RM8.83 million and revenue of RM223 million. There is no comparative financial information for the quarter due to a change in the group’s financial year from Dec 31 to June 30.
In a note today, Hong Leong Investment Bank (HLIB) Research maintained its “sell” rating on the group with an unchanged target price (TP) of 31 sen.
Likewise, TA Securities also maintained its “sell” call with an unchanged TP of 37 sen.
However, Public Investment Bank (PublicInvest) Research kept its “neutral call” on the counter.
“We make no changes to our FY2024-2025F earnings forecasts, with our TP remaining unchanged at 48 sen,” it said while asserting optimism for growth in the search and digital advertising segment based on data projections.
It noted that in the latest quarter revenue rose 5.8% to RM223 million, mainly due to higher advertising revenue for all segments except the digital and home shopping segments, amid intense competition in the digital, social media and e-commerce space.
PublicInvest said based on Statista’s projection, Malaysia’s advertising market is expected to hit US$1.53 billion (RM7.11 billion) in 2023 with TV and radio advertising accounting for the bulk of market volume at about 26%.
“However, growth in this segment is projected to be stagnant though digital and search advertising should dominate and chalk a more significant growth going forward,” it said.
“Some industry data are suggesting that the size of digital advertising is estimated to be three times the size of traditional advertising in the future.
“As such, it is vital for local broadcasters and media companies to reinvent as well as invest in digitisation to maintain their competitiveness and relevance in the advertising industry,” it added.
Adapt cost management
TA Securities said that while macroeconomic headwinds and weak sentiment dampened advertising expenditure (adex), adapt cost management helped keep Media Prima profitable.
“Most segments, including broadcasting, out-of-home, publishing, and digital media, anchored the bottom line. They more than offset losses from the home shopping segment which faced competition from in-store retail options as well as e-commerce and social commerce platforms,” it said.
The research house said the group maintained a “robust balance sheet” with a net cash position of RM184.4 million or 16.6 sen per share (+12.2% quarter-on-quarter, +3.2% year-on-year).
It added the group was cautious in the near-term, citing that ongoing macroeconomic headwinds including inflationary pressures and interest rate hikes continue to pose a downside risk to adex.
“On a brighter note, management acknowledged the decline in adex is unlikely structural. From communications with advertisers, management gathered that spending is only being held back transitorily until macroeconomic conditions improve,” said TA Securities.
To that end, it noted that Media Prima will prioritise safeguarding its position within the broadcasting and publishing market.
Meanwhile, HLIB said the group’s earnings were above its full year forecast but below consensus at 90%.
It said Media Prima faces tough times ahead as adex is projected to drop in 2023 compared to 2022 following scarce adex friendly events.
“This is on top of the fact that competition for advertising budgets remains fierce as more and more digital avenues that offer cheaper ad-supported tiers for consumers for advertising are being introduced.
“Moreover, the home shopping segment is also not expected to pose an earnings recovery soon as consumers remain prudent on discretionary spending.
As such the research house said Media Prima is subject to uncertain outcomes moving into the next quarter. However, it adjusted upwards its financial year (FY2024) forecast by +79% and FY2025 forecast by +67%.
Media Prima’s share price ended half-a-sen or 1.1% higher at 45 sen today, valuing the group at RM494 million.