KUALA LUMPUR: CIMB Equities Research is maintaining its Hold call for Media Prima Bhd
but with a higher target price of RM1.16 based on a higher 13 times CY18 price-to-earnings (P/E).
It said on Tuesday Media Prima’s unit Media Prima Digital is acquiring 100% of Rev Asia Holdings for RM105mil in cash.
The new combined entity will have a bigger digital audience reach of 10.4 million nationwide, third only to Google and Facebook.
“This would be immediately earnings accretive for Media Prima given that Rev Asia is a profitable company and we see attractive growth prospects in online adex.
“We raise our FY17-19F EPS by 3-5% to reflect the earnings impact from the acquisition,” it said.
Media Prima is acquiring 100% of Rev Asia Holdings Sdn Bhd (Rev Asia), a 70%-owned subsidiary of listed Rev Asia Bhd, for RM105mil in cash. The offer price was based on
24.7 times FY16 P/E, or a 27% premium over Rev Asia’s historical mean P/E of 19.4 times.
Rev Asia posted a historical FY13-16 profit after tax compounded annual growth rate (CAGR) of 17%. Independent valuation for Rev Asia is RM100mil to RM118mil.
Media Prime expects to complete the acquisition in 3Q17.
“Combined entity’s digital reach highest among Malaysian media The digital assets under Rev Asia are OHBULAN!, SAYS.com, Viralcham.com, and 8Share.
“Four newly acquired digital media brands are also included in the acquisition, namely Juice Magazine, MyResipi.com, SirapLimau.com, and KongsiResipi.com.
“Following the acquisition of Rev Asia, Media Prima Digital’s (MPD) reach will increase from 4.6m to 9.0m unique visitors a month. This is the highest among all Malaysian companies and third only to Google and Facebook in Malaysia.
“We are positive on the Rev Asia acquisition as it will be earnings accretive for the group.
Rev Asia’s assets portfolio will complement Media Prima’s more mature audience base, given that the former’s digital audience reach is culturally diverse and skewed towards a younger age profile of 18-to-35-year-olds.
“Moreover, we agree with management’s view that the larger digital audience reach would give Media Prima more muscle to command better advertising rates going forward,” it said.
CIMB Research, however, noted that in spite of the positive outlook, it believes the diverging editorial styles and workforce profiles could pose a challenge when integrating the two companies.
“Although management plans to absorb the entire Rev Asia content production team, we are wary about the talent retention risk post acquisition. Ultimately, talent retention is crucial to ensure the sustainability of the group’s content creation,” it said.
The research house raised its FY17-19F EPS by 3-5% to account for earnings contribution from Rev Asia.
“Overall, we expect MPD revenue contribution to the group to grow from 4% in FY16 to 6-7% in FY17-18F.
“We do not expect the Rev Asia acquisition to affect Media Prima’s ability to maintain its dividend payout due to its healthy free cashflow generation. Media Prima still offers a decent FY17 and FY18 yield of 6% and 6.2%, respectively,” it said.
Limited time offer:
Just RM5 per month.
