Media may have bottomed

Background

Let's revisit Media (or, Media Prima), which I have covered previously (here & here). Media Prima Bhd ('Media') is the largest integrated media investment group in Malaysia. Its main businesses are:

1) Television Networks, consisting of Sistem Televisyen Malaysia Berhad (“TV3”), Metropolitan TV Sdn Bhd (“8TV”), Natseven TV Sdn Bhd (“ntv7”) and Ch-9 Media Sdn Bhd (“TV9”);
2) Radio Networks comprising Synchrosound Studio Sdn Bhd (“Hotfm”) and Max-Airplay Sdn Bhd (“Flyfm”); and
3) the Outdoor Division comprising Big Tree Outdoor Sdn Bhd (“BTO”), UPD and The Right Channel Sdn Bhd (“TRC”).

In addition, it has a stake in NSTP, one of Malaysia’s largest publishing groups that publishes leading newspaper titles such as the New Straits Times, Berita Harian and Harian Metro.

Financial Results

For QE31/12/2008, Media reported a net loss of RM8.9 million due to provision for diminution in value of investment of RM31.68 million from a private-equity media funds set up by Media's wholly-owned subsidiary, mm Studios Sdn Bhd & SBC Markwendell Inc (on a 70:30 JV). This exceptional loss has weighed down Media's good performance for the last quarter, where you can see that its pre-tax profit had actually increased by 10.7% q-o-q or 10.3% y-o-y to RM52.2 million while turnover was steady at RM209 million (as compared to RM214 million for QE30/9/2008 or RM199 million for QE31/12/2007).



Valuation

If we ignore the latest result (due to the exceptional loss as noted), Media's full year EPS is about 14 sen. Based on its closed price of RM1.24 yesterday, Media is now trading at a PE of 9 times. I think Media is fairly attractive at that PE multiple.

Technical Outlook

Media may have bottomed out at the RM0.90-1.00 level (after drifting lower for one and a half year from its high of RM3.20 recorded in June 2007). In the past 2 weeks, the volume has picked up and it broke above the strong horizontal resistance of RM1.20-22 yesterday. Media's next upleg could have started.


Chart 1: Media's daily chart as at 15/4/2009 (Source: Quickcharts)


Chart 2: Media's daily chart as at 10/4/2009 (Source: Quickcharts)

Conclusion

Based on attractive valuation & likely technical breakout, Media may be a good stock for a trading BUY.