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Wednesday, March 16, 2016

Media: Bottoming Out?

Background

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) Print Division which is one of Malaysia’s largest publishing groups owning leading newspaper titles such as the New Straits Times, Berita Harian and Harian Metro;
3) Radio Networks comprising Synchrosound Studio Sdn Bhd (“Hotfm”) and Max-Airplay Sdn Bhd (“Flyfm”); and
4) Out-of-Home Division comprising Big Tree Outdoor Sdn Bhd (“BTO”), UPD and The Right Channel Sdn Bhd (“TRC”).



Financial Performance

A. Last 10 Quarters
Media's last 10 quarters financial performance shows dipping revenue and profits. To lower overhead cost, the group reduced its head counts in QE31/12/2014 through a Mutual Separation Scheme  (MSS). The MSS expenses amounted to RM79.8  million and pushed the group into the red for that quarter. This one-off expenditure may be helping the group to keep the net profit margin above the 10%-mark (except for QE31/12/2015 which was due to lower revenue).


Table: Media's last 10 quarterly P&L


Chart 1: Media's last 10 quarterly P&L

B. FY2015
 
Group performance for the current financial year had been generally affected by the soft advertising spending and subdued market sentiment. The challenging environment was reflected in the Group’s revenue which reduced by 5% against the preceding financial year.

However, profitability increased significantly as a one-off Mutual Separation Scheme (“MSS”) cost of RM79.8 million was incurred in the preceding financial year.  If the MSS cost is excluded from 2014’s results, current year’s PAT declined by 2% against the preceding year.

C. Last 10 Years

Media's revenue & earnings jumped in FY2010 after it acquired NST. After that, profits began to erode as profit margin slipped. Going forward, we will see how the cost-cutting effort succeeds after the massive MSS in 2014.


Chart 1: Media's last 10 qannual P&L

Financial Position

Media's financial position is deemed satisfactory as at 31/12/2015. Its current ratio stood at 2.7X while total liabilities to total equity was at 0.4X. The cash in hand is RM420 million or net of RM120 million (after deducting borrowing 5-year MTN 2012/2017 totaling RM300 million, with a coupon rate of 4.38%, maturing on 28 December 2017).

Valuation

Media (closed at RM1.41 yesterday) is now trading at a trailing PE of 12X (based on last 4 quarters' EPS of 12.5 sen) or at a P/book of 1X (based on NTA of RM1.46 per share). Its DY is at a decent 7%.

Substantial Shareholder selling

A close look at Changes in Shareholding reveals that EPF is persistently selling its stake in Media. As Jan 6, 2015, EPF still held 13.945% of Media's shares.

Technical Outlook

Media has broken above its long-term downtrend line, RR at RM1.35 in October last year. At the moment, the stock is recruiting buying support to absorb the persistent selling by EPF (see noted above). An upside breakout above RM1.45-1.50 would signal the start of its upleg.


Chart 2: Media's weekly chart as at Mar 15, 2016 (source: ShareInvestor.com)

The monthly chart below shows MACD crossing above the MACD signal line. Slow Stochastic has climbed up. -DMI is dropping along with +DMI climbing up. These indicators are showing a bottom in the share price of Media.


Chart 3: Media's monthly chart as at Mar 15, 2016 (source: ShareInvestor.com)

(Note: This stock traveled one full circle after I first posted on it in September 2008. It was traded as RM1.47 on Sep 2, 2008. My comment on the stock's technical outlook was "Media's share price has sliding since making a high of RM3.20 in June 2007. Its strong horizontal support is at RM1.40.")

Conclusion

Based on mild positive technical outlook and satisfactory financial position, Media could be a good long-term investment. However, it must be noted that a string recovery will only happen when financial performance improved significantly.

 Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Media.

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