‘Move will expand Media Prima’s digital platform’

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.”