‘Move will ex­pand Me­dia Prima’s dig­i­tal plat­form’

New Straits Times - - News -

KUALA LUMPUR: Me­dia Prima Bhd’s ac­qui­si­tion of REV Asia Hold­ings Sdn Bhd on Mon­day will ex­pand the for­mer’s dig­i­tal plat­form, which is part of the group’s di­ver­si­fi­ca­tion ex­er­cise amid chal­lenges in the tra­di­tional me­dia seg­ment.

Re­search houses were mixed in their calls amid con­cerns of soft adex sen­ti­ment, high costs of new ini­tia­tives and long ges­ta­tion phases in the near term.

AmBank Re­search has is­sued a buy call on Me­dia Prima with an un­changed fair value of RM1.45 per share fol­low­ing the com­pany’s en­tire stake ac­qui­si­tion of REV Asia Hold­ings (RAH) for RM105 mil­lion.

The re­search firm said the ac­qui­si­tion would give Me­dia Prima a dig­i­tal au­di­ence reach to­talling 10.4 mil­lion peo­ple, and this would vault the me­dia com­pany to the top spot in dig­i­tal reach lo­cally, be­hind global gi­ants Google and Face­book.

“RAH cur­rently has a com­bined 4.6 mil­lion monthly vis­i­tors while Me­dia Prima has 5.8 mil­lion. This al­lows Me­dia Prima to un­lock syn­er­gies by of­fer­ing its ex­ist­ing prod­ucts to the en­larged au­di­ence base, such as home shop­ping through CJ Wow Shop,” AmBank Re­search said yes­ter­day.

The re­search house said Me­dia Prima could un­lock syn­er­gies by in­creas­ing adex rates charged by RAH and that Me­dia Prima’s au­di­ence reach would ex­pand post-ac­qui­si­tion and the com­pany would be able to of­fer one-stop so­lu­tions to ad­ver­tis­ers, “i.e. from con­tent cre­ation to dig­i­tal mar­ket­ing to all other forms of advertising”.

The de­vel­op­ment would en­hance the value of Me­dia Prima in the longer term, the re­search house ex­plained.

AmBank Re­search said Me­dia Prima was in a net cash po­si­tion of RM75 mil­lion and pur­suant to the pur­chase, Me­dia Prima would record a net debt of RM30 mil­lion and a healthy net gear­ing ra­tio of 0.02 times.

Public In­vest­ment Bank opined that the ac­qui­si­tion would be pos­i­tive for Me­dia Prima in the long term as it fits into the group’s strat­egy to fo­cus on ex­pan­sion in dig­i­tal con­tent and dig­i­tal me­dia plat­forms to re­duce de­pen­dency on its tra­di­tional rev­enue base.

“Nev­er­the­less, we think weak adex sen­ti­ment, high costs of new ini­tia­tives and long ges­ta­tion phases will re­main a key con­cern for Me­dia Prima in the near term. We main­tain our earn­ings fore­cast and a tar­get price of RM1 pend­ing its first quar­ter re­sults, which will be re­leased on May 29.

“Based on a dis­counted cash flow (DCF) val­u­a­tion un­der­taken by Deloitte, REV Asia Hold­ings is worth RM100 mil­lion to RM118 mil­lion in eq­uity value.

“Fur­ther­more, the ac­qui­si­tion is pric­ing REV Asia Hold­ings at 16.2 times in earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­za­tion (EBITDA) mul­ti­ple, which is rel­a­tively fair.

“We also note that REV Asia Hold­ings is a prof­itable com­pany that recorded a 27 per cent yearon-year growth in its profit af­ter tax to RM4.2 mil­lion for its fi­nan­cial year 2016 on the back of a 32 per cent rev­enue growth.”

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