PP 7767/09/2010(025354)

Malaysia Corporate Highlights

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

R e su l ts N o t e
20 May 2010
MARKET DATELINE

Media Prima Share Price

Fair Value
:
:
RM2.09
RM2.55
Expecting Stronger Earnings Ahead Recom : Outperform
(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 30.3 0.0 3.2 0.46 9.8 3.9
2010f 1,465.5 174.5 16.3 16.3 136.4 12.8 15.0 2.6 0.42 17.1 5.2
2011f 1,545.0 192.2 18.0 18.0 10.1 11.6 17.0 2.2 0.25 16.9 5.9
2012f 1,607.3 222.1 20.8 20.8 15.6 10.1 19.0 1.9 0.09 17.5 6.5
# Excludes exceptional items ^ Excludes special dividends
Main Market Listing / Non-Trustee Stock / Not Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ No surprises. Media Prima’s 1Q core net profit of RM29.3m (-15.7% qoq) RHBRI Vs. Consensus
accounted for 16.8% and 20.3% of our and consensus expectations Above
In Line
respectively. We consider this to be within expectations as 1Q is typically a
Below
slower period. We expect stronger earnings in the coming quarters as a
result of the economic recovery and sporting events lined up. As expected, Issued Capital (m shares) 977.2
no dividend was declared during the quarter. Market Cap (RMm) 2,042.4
♦ Results highlights. 1Q revenue grew 48.1% qoq and 129.3% yoy, Daily Trading Vol (m shs) 1.4
52wk Price Range (RM) 1.082-2.31
although the numbers are not strictly comparable as 1Q10 benefited from
Major Shareholders: (%)
the full consolidation of NSTP (see below for details on its 1Q results).
EPF 24.2
Excluding NSTP, revenue fell 18.2% qoq due to seasonality while yoy,
Gabungan Kesturi 12.6
revenue jumped 26.8% yoy with growth reported by all segments Harris 5.7
(TV:+33.8% yoy; Radio: +13.7% yoy; and Outdoor: +32.5% yoy, partly
due to consolidation of Kurnia). Another positive factor we note was that FYE Dec FY10 FY11 FY12
TV discount fell to 69.3% in 1Q10 vs. 71.0% in 4Q09 (1Q09: 67.8%). EPS chg (%) - - -
Var to Cons (%) 8.8 5.7 9.3
♦ NSTP off to a good start. Meanwhile, NSTP reported 1Q10 net profit of
RM10.6m, as compared to a net loss of RM2.9m for 1Q09. Revenue rose PE Band Chart
10% yoy due to to a combination of stronger advertising (+8% yoy) and
circulation (+13% yoy due to higher circulation numbers and cover price PER = 22x
PER = 17x
hike for Harian Metro in mid-Apr ‘09) revenues. The swing in profitability PER = 12x
PER = 7x
was further aided by lower newsprint cost (lower operating expenses: -
5.6% yoy), partly offset by losses incurred by MNI as a result of the weak
newsprint prices. Separately, Media Prima is currently holding 89.6% of
NSTP and would be seeking shareholders’ approval to be delisted. The
remaining NSTP shareholders will be offered an exit offer of 1.2 Media
Prima Shares and 0.2 Media Prima warrants for every 1 NSTP share held. Relative Performance To FBM KLCI
The delisting of NSTP is expected to be completed by Sep.
♦ Risks. The risks include: 1) weaker-than-expected adex growth; 2) high
Media Prima
discounting activities; and 3) high foreign shareholding level (~31.7%).
♦ Forecasts. We have maintained our FY10-12 earnings forecast unchanged
FBM KLCI
for now.
♦ Investment case. Our indicative fair value is maintained at RM2.55 (fully
diluted), which is based on unchanged target FY10 PER of 15x. Media
Prima is, in our view, well poised to benefit from the faster recovery in TV
adex. Aside from improving fundamentals, further potential catalysts we
see ahead for the enlarged entity include the potential realisation of
merger synergies and a rerating in valuations. Thus, we are reiterating our David Chong, CFA
Outperform call on the stock. (603) 9280 2186
david.chong@rhb.com.my
Please read important disclosures at the end of this report.

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Table 2. Earnings Review

QoQ YoY
FYE Dec (RMm) 1Q09 4Q09 1Q10* (%) (%) Comments
141.2 218.5 323.7 48.1 >100
Revenue Excluding NSTP, revenue was down 18.2% qoq due to
seasonal effects while yoy, revenue rose 26.8% due to
stronger ad revenue reflecting the recovery in
macroeconomic conditions.

9.2 11.2 48.7 >100 >100

EBITDA
(11.7) (14.4) (24.0) 67.3 >100
Dep & amort

(2.5) (3.1) 48.7 >100 >100

EBIT 4Q09 impacted by write-downs, impairments and allowances
on certain properties and assets amounting to RM38.1m.
(5.6) (6.6) (6.9) 4.7 22.2
Interest exp Total debt as at 1Q10 was RM658.6m, which is inclusive of
NSTP’s debt of RM98.9m that Media Prima now consolidates
(4Q09: RM595.1m; 1Q10: RM429.9m).
(1.3) 5.2 (0.7) >100 (47.0)
Associates
0.0 216.1 17.5 (91.9) nm
Negative goodwill Negative goodwill relates to additional acquisition of majority
stake in NSTP.
(9.4) 211.6 58.7 (72.3) >100
Pre-tax profit
(0.6) 1.2 (11.8) >100 >100
Tax
(9.9) 212.8 46.9 (78.0) >100
Profit from continuing
operations
(19.0) (43.1) 0.0 (100.0) (100.0)
Loss from sub held for With the disposal of MPI completed in FY09, Media Prima
sale would not need to absorb any further losses from FY10.
0.0 38.2 0.0 (100.0) nm
Gain on disposal of sub
held for sale
5.7 (15.7) (1.3) (91.7) >100
Minority interest
(23.2) 192.3 45.6 (76.3) >100
Reported PATAMI
(9.9) 34.8 29.3 (15.7) >100
Normalised PATAMI Profit from continuing operations, adjusted for negative
goodwill, write-downs and impairments (4Q09 and 1Q10).

Margins (%)
EBITDA 6.5 5.1 15.0
EBIT (1.8) (1.4) 15.0
Pre-tax (6.6) 96.9 18.1
Effective tax rate (6.1) (0.6) 20.1
Recurring net profit (7.0) 15.9 9.1
*1Q10 figures reflect a full quarter’s consolidation of NSTP and hence, qoq and yoy numbers are not strictly comparable.
Source: Company data

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Table 3 : Earnings Forecasts Table 4 : 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 118.2 366.2 388.7 420.9 - 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 18.9 7.3 5.2
EBIT 67.8 265.6 286.1 316.1
EBIT margin (%) 9.1 18.1 18.5 19.7 Newsprint cost (US$/tonne) 580 625 625
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

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and
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have an interest in the securities mentioned by this report.

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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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