Malaysian media and entertainment company Media Prima Bhd could be profitable again next year, buoyed by lower costs and some topline improvements in certain segments, according to CGS-CIMB Research.
The expectations are based on the fact that Media Prima's first-half (1H) core net loss was significantly narrower than its forecast, thanks to aggressive cost cuts and turnaround in home shopping.
Media Prima reported a core net loss of RM38.3 million in 1H ended June 30 2020, excluding termination costs of RM11.3 million.
It made up only 28 per cent of CGS-CIMB’s full-year forecast, and 49 per cent of consensus – and it expects the group to perform better in 2H with advertisers slowly returning after Malaysia's coronavirus lockdown was relaxed from May.
The core net loss was also 25.7 per cent narrower year-on-year (yoy), a result of aggressive cost cuts, since the company’s turnover contracted by 11.3 per cent yoy.
CGS-CIMB said Tan Sri Syed Mokhtar Albukhary's entry as Media Prima's largest shareholder had slowly but surely brought about many structural changes to the group.
Media Prima's operating segments had been reorganised from the second quarter of the year.
Media Prima Omnia, the group's wholly-owned omni-channel advertising sales firm, now forms one of Media Prima's operating segments – it is responsible for sales of ad inventories for the group's television and radio divisions – merged into one segment, the 98.2 per cent-owned New Straits Times Press (M) Bhd and Primeworks Studios, branded content.
“We now forecast (Media Prima's) financial years 2021-2022 to be in the black, on the back of lower costs and some topline improvements, specifically for TV and home shopping,” CGS-CIMB said in a report.
“We may accord a higher valuation to the stock if Media Prima posts better results in subsequent quarters,” it said, adding that a near to mid-term catalyst for Media Prima would come from a potential privatisation.
Downside risks are advertising revenue plummeting and operating costs elevating in 2H.
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