PP 7767/09/2010(025354)

Malaysia
RHB Research
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Com pany Upda te 28 April 2010

MARKET DATELINE
Share Price : RM2.28
Media Prima Fair Value
Recom
:
:
RM2.55
Outperform
Strong Start For TV and Print Adex (Maintained)

Table 1 : Investment Statistics (MEDIA; Code: 4502) Bloomberg: MPR MK

Net Core EPS Net
FYE Turnover profit EPS EPS# Growth# PER# C.EPS* P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009 744.0 194.8 18.2 6.9 -52.0 33.0 0.0 3.2 0.46 9.8 3.9
2010f 1,465.5 174.5 16.3 16.3 136.4 14.0 15.0 2.6 0.42 17.1 5.2
2011f 1,545.0 192.2 18.0 18.0 10.1 12.7 17.0 2.2 0.25 16.9 5.9
2012f 1,607.3 222.1 20.8 20.8 15.6 11.0 19.0 1.9 0.09 17.5 6.5
# Excludes exceptional items
Main Market Listing / Non-Trustee Stock / Not Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ 1Q10 adex for TV and print off to a good start. According to Nielsen Issued Capital (m shares) 977.2
Media Research (“NMR”), 1Q10 adex for Media Prima’s TV channels jumped Market Cap (RMm) 2,228.1
34.6% yoy while the print media saw gross adex grow by 7.5% yoy. For Daily Trading Vol (m shs) 1.4
the TV segment, 1Q adex growth was led by TV9 (+62% yoy) while for the 52wk Price Range (RM) 1.08-2.31
print media, the growth mainly came from Harian Metro (18% yoy). Major Shareholders: (%)
Generally the stronger TV adex growth is consistent with past trends, EPF 24.2
where we note that TV adex has historically had a higher leverage to GDP Gabungan Kesturi 12.6
growth, vis-à-vis print adex. Harris 5.7
♦ TV discounts expected to trend down. For FY09, average discount for
the TV segment was 68.8% (FY08: 61.6%) as the weaker economic FYE Dec FY10 FY11 FY12
conditions then meant that higher discounts were required to secure EPS chg (%) 9.9 13.5 n.a.
commitments from advertisers. For FY10, management expects discounts Var to Cons (%) 8.8 5.7 9.3
for the TV segment to average around the 65%-level as economic
PE Band Chart
conditions improve. For every 1%-pt decline in the average discount rate,
revenue would increase by an estimated RM20.4m (3.1%) and the bulk of
this increase should flow down to Media Prima’s bottomline. In addition,
PER = 19x
both the stronger gross adex and lower discounts would help cushion PER = 15x
higher content cost and overheads. Management expects content cost to PER = 11x
PER = 7x
increase by around 5% this year due to higher content cost for sports.
♦ Stronger market share for NSTP in 1Q10. NSTP’s print adex market
share grew to 31.5% in 1Q10 from 29.2% in 1Q09. This was largely due to
the growth in adex from the malay dailies, partly offset by NST’s market
share loss. Management, however, remains positive on the adex outlook
Relative Performance To FBM KLCI
for NST given improving economic conditions and major sporting events in
FY10. Over at the cost side, NSTP is currently carrying about 6 months
Media prima
worth of newsprint stock, at an average cost of around US$635/tonne
(around 3 months’ stock at US$700/tonne and another 3 months’ stock at
US$500/tonne) vs. current spot price of US$615/tonne. The current stock
level is expected to last NSTP until Oct ’10.
♦ Risks. The risks include: 1) weaker-than-expected adex growth; 2) high
FBM KLCI

discounting activities; and 3) high foreign shareholding level (~31.7%).

♦ Forecasts. We have revised up our FY10 and FY11 ad revenue growth
projections for the TV segment to +8% and +5% respectively (from
+3.8% and +4.5%) and for print segment, to +4.9% and +4.6%
respectively (from +1.5% and +2.0%). Overall, our FY10-11 net profit
forecasts have been raised by 9.9%-13.5%.
♦ Investment case. Following the earnings revision above, our indicative
fair value has been revised upwards to RM2.55 (fully diluted) from RM2.23,
based on unchanged target FY10 PER of 15x. Despite the strong YTD share
price performance, we believe there is still upside to the current share
price should adex growth (especially the TV segment) turn out to be David Chong, CFA
stronger than expected as well as the potential realisation of merger (603) 9280 2186
david.chong@rhb.com.my
synergies, which we have yet to factor in our forecasts. We, thus, reiterate
our Outperform call on the stock.

Please read important disclosures at the end of this report.Page 1 of 3

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 28 April 2010

Table 2 : Earnings Forecasts Table 3 : Forecast Assumptions

FYE Dec (RMm) FY09a FY10f FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 744.0 1,465.5 1,545.0 1,607.3 Adex revenue growth (%)

Turnover growth (%) 39.2 97.0 5.4 4.0 - TV3 18.9 7.3 5.2
- NTV7 24.3 9.2 7.0
EBITDA 118.1 366.2 388.7 420.9 - 8TV 22.9 9.0 6.8
EBITDA margin (%) 15.9 25.0 25.2 26.2 - TV9 23.4 8.9 3.0
- Radio 3.3 10.0 5.0
Dep & amort (50.4) (100.7) (102.7) (104.8) - Outdoor 25.5 5.0 3.0
- NSTP 4.9 4.6 4.4
EBIT 67.7 265.6 286.1 316.1
EBIT margin (%) 9.1 18.1 18.5 19.7 Newsprint cost (US$/tonne) 580.0 625.0 625.0
Net Interest (24.4) (31.5) (26.1) (14.0)
Associates 16.5 7.0 5.0 3.0
Negative goodwill 216.1 0.0 0.0 0.0

Pretax Profit 275.8 241.1 264.9 305.0

Tax (24.0) (60.3) (66.2) (76.3)
Loss from sub held
(95.3) 0.0 0.0 0.0
for sale
Minorities 0.0 (6.3) (6.5) (6.6)
Net Profit 194.8 174.5 192.2 222.1
Core Net Profit 73.8 174.5 192.2 222.1
Source: Company data, RHBRI estimates

Chart 1: Media Technical View Point

♦ The share price of Media regained its upward
momentum in mid-Feb and removed the RM1.95
heavy resistance level successfully in Mar 2010.

♦ The stock hit a high of RM2.37 in Apr 2010, before

encountering a mild consolidation to around the
RM2.20 support level in recent trading.

♦ Registered with a second positive candle in the last

three days, added with the upticks on the
momentum indicators, it may continue to surge in
the near term to retest the RM2.37 high soon.

♦ Upon removal of RM2.37, it will head towards the

RM2.44 and RM2.65 levels.

♦ Chart wise, it is likely to sustain at above RM2.20,

followed by the 40-day SMA of RM2.11, Further
resistance-turn-support level is at RM1.95, while
the medium-term support is at the RM1.80 –
RM1.95 region and the UTL near RM1.85.

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IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over
a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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