Maybank Investment Bank Bhd (Maybank IB) has maintained a HOLD call on Media Prima Bhd with a target price (TP) of RM0.46, reflecting a limited upside potential of less than 10%. This decision follows the company's weaker-than-expected 1QFY25 results, which were impacted by poor consumer sentiment.

The first-quarter core net profit fell sharply by 87% year-on-year (YoY) to RM1.9 million, accounting for just 5% of Maybank IB's full-year estimate. In addition, Media Prima's earnings before interest, taxes, depreciation, and amortisation (EBITDA) of RM23.4 million, which was 37% lower than the same period last year, also underperformed expectations.

Maybank IB's analysts note that Media Prima's cost structure remains relatively fixed, making the company vulnerable to negative operating leverage. This was evident as Media Prima's revenue fell by 9% YoY, primarily due to a decline in advertising expenditure (adex), which decreased by 8% YoY. The advertising industry has been under pressure as advertisers are reducing spending, reflecting a general decline in consumer sentiment. Furthermore, Media Prima's core net profit was also down 80% on a quarter-on-quarter (QoQ) basis, even though revenue remained flat. The analysts attribute this to higher broadcasting expenses, which dampened profitability despite stable revenues.

Looking ahead, Maybank IB remains cautious about the outlook for Media Prima. While there is potential for short-term improvements, particularly due to seasonally higher adex in 2QFY25 and expected boosts from the upcoming civil service salary hikes and minimum wage increases, the analysts remain wary of the potential impact of the planned rationalisation of the RON95 subsidy for the T15 income group scheduled for mid-CY25. The removal or reduction of subsidies for this group could further dent consumer sentiment and, by extension, advertising spending. Historically, increases in RON95 prices have led to reduced adex, and this time, even though the subsidy rationalisation is not as broad-based, its impact is still uncertain.

Despite these challenges, Maybank IB has opted to maintain its earnings estimates for the company, which assume no revenue growth over the next three fiscal years. The TP of RM0.46 is based on a 0.9x price-to-book value (P/BV) multiple for end-FY25, excluding goodwill. Media Prima's current share price is RM0.48, which means that analysts are expecting limited upside from current levels. The overall recommendation remains a HOLD, reflecting the challenges faced by the company, which operates in a volatile and competitive media landscape.