Media- an attractive long-term investment

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) 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.

Recent Financial Results

Media had recently announced its results for 2Q2009 ended 30/6/2008, where its net profit increased by 80.0% q-o-q or 22.5% y-o-y to RM30.7 million. Its turnover increased by 24.4% q-o-q or 18.8% y-o-y to RM198.5 million. The improved performance is mainly due to the full effect of the new Outdoor Division which was acquired at the end of 1Q2007, together with significantly higher revenue recorded by TV and Radio Networks, driven by strong advertising demand arising from Euro 2008 and positive domestic consumption. In addition, Media had benefited from the continued improvement in NSTP’s operational results and lower finance costs. These improvements were partially offset by a RM5.5 million charge on voluntary separation scheme (VSS) cost undertaken during the period.



Valuation

Media (closed at RM1.47 as at September 2nd) is now trading at a trailing PE of 9 times (based on last 4 quarters' EPS of 16 sen) or at a P/book of 2.2 times (based on NTA od RM0.66 per share). Being the largest integrated media investment group in Malaysia, Media would benefit from increased media spending in the current competitive economic environment. Media's current PE of 9 times is much lower than STAR's current PE of 14 times.

Technical Outlook

Media's share price has sliding since making a high of RM3.20 in June 2007. Its strong horizontal support is at RM1.40.


Chart: Media's weekly chart as at September 2nd, 2008 (source: Tradesignum.com)

Conclusion

Based on improving financial performance, attractive valuation & potentially strong technical support (at the present level), I think Media could be a good long-term investment.