Media Prima 3QFY08 : Weaker quarter
• Above house expectation but below consensus
9MFY08 results came in within house expectation but below consensus. Annualised adjusted net profit accounts for 116.4% and 89.5% of house and consensus estimates respectively. Revenue in 3Q08 only increased marginally by 1%y-o-y and 8% q-o-q. However, higher operating costs which include content costs and A&P caused EBITDA and PBT to fall 20% y-o-y respectively.
• Weaker margins
EBITDA margins for 9MFY08 fell to 23.7% from 28.0% recorded a year earlier. 9MFY08 net profit margin has also slide slightly to 14.9% from 16.3% in 9MFY07. The margin squeeze could be due to a wider discount
factor which is required to induce advertisers to spend more when consumer sentiments were weak due to the high inflations and petrol prices during the period. Higher content costs and A&P expenditure have
also contributed to the lower margins.
• We expects weaker quarters ahead
Although petrol price and inflation has come down in recent weeks, we expect consumer sentiment to continue to be fragile due to the uncertain global economic environment as well as the expectation of rising
unemployment locally and regionally, thus hurting retail expenditure. Also, management revealed that some of the top advertisers are behind their commitment levels as companies are facing rising costs and expecting
• TP downgrade
We are pegging a lower PE of 10x to FY09E EPS of 12.5 sen to account for the lower market valuation as well as the uncertain economic conditions and worsening retail sentiment outlook for next year. Accordingly, TP is lowered to RM 1.25 from RM2.53, which still offers a 34% upside from the last closing price of RM0.93. We maintain our BUY call.