Initiating Coverage. A diversified media conglomerate. Media Bloomberg Ticker: MPR MK Bursa Code: October 2012

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1 Initiating Coverage (Member of Alliance Bank group) PP7766/03/2013 (032116) 3 October 2012 Analyst Toh Woo Kim wookim@alliancefg.com month upside potential Target price 2.52 Current price (as at 2 Oct) 2.38 Capital upside (%) 5.9 Net dividends (%) 5.1 Total return (%) 11.0 Key stock information Syariah-compliant? Yes Market cap (RM m) 2,569 Issued shares (m) 1,079 Free float (%) week high / low (RM) 2.66 / mth avg volume ( 000) 1,708 3-mth avg turnover (RM m) 4.0 Share price performance 1M 3M 6M Absolute (%) Relative (%) Share price chart Major shareholders % Employees Provident Fund 18.4 Amanah Raya Bhd 11.4 Kumpulan Wang Pesaraan 5.2 Harris Associates 5.0 Media Prima A diversified media conglomerate Neutral Media Bloomberg Ticker: MPR MK Bursa Code: 4502 Against a backdrop of slower adex growth in 2013, we initiate coverage on Media Prima with a NEUTRAL recommendation and TP of RM2.52 based on target P/E of 12x FY13 earnings. Unresolved Eurozone debt crisis, lack of major adex-friendly events, and potential subsidy rationalisation post general election are expected to crimp overall adex growth in 2013, impacting the more sensitive TV segment of Media Prima, but fortunately balanced out by its still growing Malay-language newspapers in the print segment. Key catalyst for Media Prima will be introduction of new channels upon full implementation of DTTB, while Astro s potential aggressive move to grow its TV adex will be a key risk. Net dividend yield for Media Prima is expected to be about 5.1%, which is decent and comparable to peers. TV The dominant market leader Media Prima has an overall TV viewership share of 46%, giving it a dominant position in the TV segment. Free-to-air (FTA) TV adex has been growing faster and taking market share from newspapers since Over the years, the relaxation of the rules and guidelines on advertisements has encouraged the growth of TV advertising in Malaysia. Given strong pricing power due to its dominant position, Media Prima is able to hike its advertising rates from time to time, allowing it to fully capitalise on an industry uptrend. Even during a challenging period for adex, Media Prima is still able to selectively raise its ad rates by 5-10%, particularly for prime time slots. Newspapers NSTP gaining grounds Backed by favourable demographics and rising literacy rate, Malay-language newspapers are actually seeing an upward trend in their overall daily circulation vs. flat or slight decline for English/Chinese-language newspapers. This is largely led by Media Prima flagship tabloid newspaper, Harian Metro. Media Prima has been raising its advertising rates for Harian Metro above industry average, catching up with Star s rates. Despite that, its rates are still 15-20% below Star currently, indicating there is still room for rates to increase further. Digital TV Opening up new possibilities The full implementation of digital terrestrial TV broadcasting (DTTB) will enable Media Prima to introduce new channels and more advertising slots. Given Media Prima s track record in growing new channels and effective segmentation strategy, we believe any revenue cannibalisation of its existing channels could be minimised. Having more channels and more contents will also help Media Prima to compete more effectively with Astro for TV viewership share. Astro to grow its TV adex aggressively? With the introduction of free satellite TV service NJOI, we believe Astro is planning to grow its adex revenue aggressively in order to compensate for the lack of growth in its pay-tv subscription service. If NJOI was to take off very successfully, this would give certain Astro channels at least 80% household penetration. With that kind of reach, Astro could become a bigger player in the TV adex market, a risk to Media Prima current dominant position. Valuation and recommendation We value Media Prima at RM2.52 based on target P/E of 12x FY13 earnings, in line with its historical average and our target P/E for the sector. Hence, we initiate coverage on Media Prima with a NEUTRAL recommendation. Net dividend yield for Media Prima is expected to be about 5.1%, which is decent and comparable to peers. All required disclosure and analyst certification appear on the last two pages of this report. Additional information is available upon request. Redistribution or reproduction is prohibited without written permission

2 SNAPSHOT OF FINANCIAL AND VALUATION METRICS Figure 1 : Key financial data FYE 31 Dec FY10 FY11 FY12F FY13F FY14F Revenue (RM m) 1, , , , ,795.1 EBITDA (RM m) EBIT (RM m) Pretax profit (RM m) Reported net profit (RM m) Core net profit (RM m) EPS (sen) Core EPS (sen) Alliance / Consensus (%) Core EPS growth (%) 16.8 (19.2) P/E (x) EV/EBITDA (x) ROE (%) Net gearing (%) Net Cash Net Cash Net Cash Net Cash Net Cash Net DPS (sen) Net dividend yield (%) BV/share (RM) P/B (x) Source: Alliance Research, Bloomberg Figure 2 : Forward P/E trend Figure 3 : Forward P/B trend 21 PE (x) sd = 14.9x Avg = 10.8x 9-1sd = 6.8x Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan PB (x) sd = 3.0x Avg = 2.0x sd = 1.0x Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: Alliance Research, Bloomberg Source: Alliance Research, Bloomberg Figure 4 : Peer comparison Company Call Target price (RM) Share price (RM) Mkt Cap (RM m) EPS Growth (%) P/E (x) P/B (x) ROE (%) Net Dividend Yield (%) CY12 CY13 CY12 CY13 CY12 CY13 CY12 CY13 CY12 CY13 Media Chinese International Buy , Media Prima Neutral , Star Publications Neutral , Average 7, Source: Alliance Research, Bloomberg Share price date: 20 September

3 A diversified media conglomerate Figure 5 : Media Prima group structure Source: Company Transformation over the years Media Prima has built its media empire via several M&As over the years Media Prima has transformed by leap and bounds over the years since its establishment pursuant to the de-merger exercise of Malaysian Resources Corporation Bhd in Starting with just a free-to-air (FTA) TV station and a 43%-stake in NSTP, Media Prima s main media assets have now grown to four FTA TV stations, a higher 98%-stake in NSTP, three radio stations, and four outdoor advertising companies. These have been done through several M&A exercises (see Figure 6). Figure 6 : M&A activities of Media Prima since its establishment in 2003 Period Acquisitions Platform August 2003 De-merger exercise with 100% stake in TV3 TV August 2003 De-merger exercise with 43% stake in NSTP Print January 2004 Acquired 80% equity stake in Merit Idea S/B, which was TV launched as 8TV April 2005 Acquires 75% stake in Max Airplay S/B, which was launched as Radio Fly.fm September 2005 Acquires 100% of CH-9 Media S/B, the operator of TV9 TV December 2005 Acquires 100% of Natseven TV S/B, the operator of ntv7 TV December 2005 Acquires 100% of Syncrosound Studio S/B, which was launched Radio as Hot.fm November 2006 Acquired 70% stake in Big Tree Outdoor Outdoor February 2007 Acquired 100% stake in UPD Outdoor February 2007 Acquired 100% stake in TRC from NSTP Outdoor March 2007 Acquired the remaining 30% stake in Big Tree Outdoor Outdoor June 2007 Acquired the remaining 20% stake in 8TV TV January 2009 Acquired 80% stake in Radio Wanita S/B and rebrands to Radio One.fm December 2010 Acquired the remaining 55% stake in NSTP Print December 2010 Acquired the remaining 25% stake in Fly.fm Radio May 2011 Acquired 100% stake in Kurnia Outdoor Outdoor Source: Company, Alliance Research 3

4 Dominant position in FTA TV and Malay-language newspaper in Malaysia Excluding government-owned channels (RTM and Al-Hijrah), Media Prima virtually has a monopoly on all privately-held FTA TV stations in Malaysia. As such, it commands a sizeable 87% of the gross FTA TV adex in Malaysia (as at 1H12). See Figure 7. Dominant position in FTA TV and Malay-language newspaper Apart from that, Media Prima also holds a dominant position in the growing Malay-language newspaper segment with its flagship Harian Metro tabloid newspaper. The shift towards vernacular newspapers in recent years has benefited Media Prima, which currently commands a 34% market share (that is still rising) of the print adex in Malaysia (see Figure 8). Figure 7: Market share of FTA TV adex in 1H12 Figure 8 : Market share of print adex in 1H12 RTM 13% MCIL 23% Media Prima 34% Media Prima 87% Others 17% Star 26% Source: Company, Nielsen Media Research Source: Company, Nielsen Media Research Decent market share in outdoor and radio Beside FTA TV and print media, Media Prima also has decent market share in outdoor advertising and radio advertising. See Figures 9 and 10. Figure 9: Market share of outdoor adex Figure 10 : Market share of radio adex, 1H12 Seni Jaya 7% Spectrum 5% Media Prima 27% Redberry Group 16% Media Prima 44% RTM 5% Astro 53% Others 28% Star 15% Source: Company Source: Company, Nielsen Media Research 4

5 TV The dominant market leader Capturing 46% of TV viewership share in Malaysia Media Prima TV viewership share stands at 46% Viewership breakdown shows Media Prima leadership position in key target audiences As at 2Q12, Media Prima has an overall TV viewership share of 46%, giving it a dominant position in the TV segment. Government-controlled TV stations (RTM and Al-Hijrah) are at a distant second with combined TV viewership of only 13%. The viewership breakdown according to different categories of viewers helped to highlight Media Prima TV channels leadership position among the key target audiences i.e. TV3 and TV9 for Malay audiences, 8TV and ntv7 for Chinese audiences (see Figure 11). Effective segmentation of its channels and contents has made it easier for Media Prima to capture the different target viewers that are relevant to various kinds of advertisers (see Figure 12). Figure 11 : TV viewership share, Jan-June 2012 Station Total 4+ Viewers Chinese 4+ Viewers Malay 15+ Viewers TV ntv TV TV Media Prima - Total TV TV Al-Hijrah Astro Source: Company, Nielsen Audience Measurement Figure 12 : Segmentation of Media Prima TV stations Station Target Viewers Positioning Advertising Focus Mass market skewed towards Malay audience, with progressive mindsets Channel synonymous with family, reallife, entertainment and news content leaning toward cultural proximity Inspirasi Hidupku FMCG products, communications, services, transportation Malaysian urban households; years old; kids & Chinese Television as an escapade My Feel Good Channel Brands targeting the Malaysian urban middle to high class; image products and lifestyle Young Malaysian urban, Chinese; years old Mass market skewed towards young semi-urban and rural Malays Tastemaker, energetic and differentiation in content We are different Young semi-urban Malays skewed content with a mixture of drama, reallife and current affairs Dekat Di Hati Brands targeting the young urban; sports, energy drink, fashion, and Chinese viewers; health and wealth related FMCG products, non-traditional advertisers, government Source: Company Is Astro high viewership a concern? Pay-TV Astro viewership is accumulated over 153 channels vs. only 4 for Media Prima Pay-TV Astro also has a high TV viewership of 41%, but this not a concern for Media Prima as Astro TV viewership is accumulated over 153 channels vs. only four channels for Media Prima. Hence, Media Prima s concentrated viewership is a better choice and more effective advertising medium for advertisers with its larger viewership base per channel compared to Astro. 5

6 Astro s discount factor is very high at >90% vs. 67% for Media Prima Moreover, Astro s revenue is still mainly derived from subscription service, while advertising revenue only made up less than 10% of its total annual revenue. A comparison between gross pay-tv adex reported by Nielsen and Astro s net advertising revenue figure showed that the discount factor for Astro is very high at >90% (vs. 67% for Media Prima), reflecting the fragmented viewership of Astro channels (and to some extent, the limitation of Nielsen statistics). Benefiting from rising overall adex share FTA TV has been growing faster and taking market share from newspapers FTA TV adex has been growing faster and taking market share from newspapers since 2005, as shown in Figure 13 below. Over the years, the relaxation of the rules and guidelines (i.e. local content and restriction on foreign actors) on advertisements has allowed MNC advertisers to re-use their already-available regional or global commercials for TV advertising in Malaysia. Hence, this reduced the need to produce new commercials to suit local requirements, which effectively lower the cost of TV advertising. From a cost perspective, advertisers also reckon that TV is still the more cost effective medium relative to newspapers, given its wider audience reach. Still a larger gap between net adex for FTA TV and newspapers, indicating further room for growth Based on Nielsen Media Research official figures, FTA TV garnered 36% of Malaysia gross adex in 2011 vs. newspapers gross adex market share of 53%. However, in reality, there is still a larger gap between net adex for FTA TV and newspapers, bearing in mind the relatively higher discount factor for FTA TV (about 65-70%) compared to newspapers (about 15-30%). Figure 13 : Adex market share of FTA TV vs. newspaper 70% 60% 50% 60% 61% Newspapers 58% 56% 54% 51% 51% 53% 40% FTA TV 30% 29% 29% 31% 33% 35% 37% 38% 36% 20% Source: Nielsen Media Research Strong pricing power due to dominant position Given dominant position, Media Prima was able to hike its ad rates even in bad times Given strong pricing power due to its dominant position, Media Prima is able to hike its advertising rates from time to time, allowing it to fully capitalise on an industry uptrend. For example, Media Prima was able to hike its TV ad rates by 15-30% in early 2011 when the adex market was recovering strongly. This compared to a hike of only 5-6% in early Even during a challenging period for adex such as in 1H12, Media Prima is still able to selectively raise its ad rates by 5-10%, particularly for prime time slots. 6

7 Newspapers NSTP gaining grounds Rising circulation of Malay-language newspapers Malay-language newspapers are seeing an uptrend in daily circulation Backed by favourable demographics and rising literacy rate, Malay-language newspapers are actually seeing an upward trend in their overall daily circulation vs. flat or slight decline for English/Chinese-language newspapers (see Figure 14). This rising daily circulation of Malaylanguage newspapers is largely led by Media Prima flagship tabloid newspaper, Harian Metro. Based on statistics from Audit Bureau of Circulation, Harian Metro actually accounted for 59% of the overall increase in Malay daily circulation since 2006 to 2011 (see Figure 15). Figure 14: Average daily circulation, by language (in 000) Figure 15 : Malay newspapers average daily circulation (in 000) 1,000 Malay Chinese English 500 Berita Harian Utusan Malaysia Kosmo Harian Metro Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 0 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Source: Audit Bureau of Circulation Source: Audit Bureau of Circulation Adex spending on Malay-language newspapers is rising too Market share for Malay-language newspapers have increased in tandem with rising circulation Rising circulation has led to higher adex spending and increase in market share for Malaylanguage newspapers over the last few years, mainly at the expense of English-language newspapers (see Figure 16). This is not surprising as advertisers are adjusting their spending patterns accordingly given the headwinds faced by English-language newspapers (i.e. English content widely available online) compared to vernacular newspapers. Figure 16 : Newspaper adex market share, by language (%) English Chinese Malay H2012 Source: Company, Nielsen Media Research 7

8 Harian Metro catching up with Star s ad rates Strong increase in ad rates for Harian Metro Media Prima is also planning to increase the ad-to-content ratio Capitalising on the trend, Media Prima has been raising its advertising rates for Harian Metro above industry average, catching up with Star s rates (see Figure 17). Despite that, its rates are still 20% below Star currently, indicating there is still room for rates to increase. More high-quality advertisers are willing to advertise on Harian Metro now given the favourable circulation trend, and this gives Media Prima the pricing power to raise its rates. Apart from raising rates, Media Prima is also looking to increase the ad-to-content ratio from 60:40 currently to 70:30, which will further help Media Prima to generate more revenue from its flagship Harian Metro newspaper. Figure 17 : Official ad rates by leading newspapers (in RM per single column cm) Harian Metro Star Sin Chew Daily Source: Companies, Alliance Research 8

9 Opportunity and risk Digital TV Compelling growth opportunity Figure 18 : Phases in the DTT migration plan Source: MCMC Regulator is evaluating tender bids for DTTB migration project Media Prima not going to incur higher expenses during simulcast period DTTB is positive for Media Prima as there will be capacity for new channels Hence, Media Prima is able to leverage on its huge content library The regulator is currently evaluating tender bids for FTA TV migration from analogue to digital terrestrial TV broadcasting (DTTB). Winner of the project will build and operate the digital TV broadcast infrastructure so that all broadcasters such as RTM and Media Prima can utilise the infrastructure to transmit their TV programmes. According to the migration plan, there will be a simulcast period (concurrent transmission of analogue and digital TV) up to 2015 before analogue TV service is finally switched off (see Figure 18). The new platform is expected to have an expanded capacity of about 18 HD or SD channels, vs. only 6 SD channels currently. As far as Media Prima is concerned, management said it is not likely that Media Prima will incur higher expenses during the simulcast period. There are also no worries about higher transmission fees post migration, as it was clearly stipulated that the winner of the tender will not be able to charge more for transmission services and FTA TV players will still pay existing rates. In terms of capex, the on-going replacement of analogue equipment with digital equipment is already part of its annual capex requirement and hence, there will not be a huge increase to capex once digital transmission starts. So far, Media Prima has spent about RM50-60m in total since 2H10 as part of its digital equipment replacement program. In our view, the full implementation of DTTB will be a medium-term catalyst for Media Prima, as the company will then be able to introduce new channels (more advertising slots). Given Media Prima s track record in growing new channels (8TV and TV9) and effective segmentation strategy, we believe any revenue cannibalisation of its existing channels could be minimised. Having more channels and more contents will also help Media Prima to compete more effectively with Astro for TV viewership share. Media Prima also has a huge content library (about 70,000 programming hours of content), which it can leverage on when launching new channels. As these contents are already carried at zero cost in its books, we believe the incremental costs (mostly additional transmission fees) on rolling out new channels will be rather minimal relative to the potential advertising revenue that could be generated. Overall, while we are positive and confident that Media Prima will introduce new channels upon full implementation of DTTB, we have yet to input this into our forecasts given the longer-time horizon and lack of guidance from management for now. 9

10 Astro to grow its TV adex aggressively? We believe Astro is planning to grow its adex revenue Njoi can help Astro to penetrate 30% of lower-end household With the introduction of free satellite TV service NJOI, we believe Astro is planning to grow its adex revenue aggressively in order to compensate for the lack of growth in its pay-tv subscription service. This seems to be the case considering that Media Prima free channels are excluded from NJOI, a departure from Astro current practice of including those channels in its pay-tv service. According to Astro management, its current traditional pay-tv platform can reach up to 70% household penetration (from 50% penetration currently), while the remaining 30% will be addressed by its lower-end NJOI platform. Hence, this would give certain Astro channels at least 80% household penetration if NJOI was to take off very successfully. With that kind of reach, Astro could become a bigger player in TV adex market, a risk to Media Prima current dominant position (see Figures 19 and 20) Figure 19: Net TV adex in Malaysia (in RMm) Figure 20 : Share of 2011 net TV adex by operator 1,600 1,400 FTA TV Pay-TV RTM 11% 1,200 1, ,006 Media Prima 63% Astro 26% Source: Company, Zenith, Astro IPO Prospectus Source: Zenith, Company, Astro IPO Prospectus Comparison below shows that NJOI offers a few Malay and Chinese language channels that could somehow compete with the four channels offered by Media Prima (see Figure 21). In addition to that, NJOI has Tamil and education-focused channels that are not offered by Media Prima channels. Figure 21 : Comparison of Astro NJOI and Media Prima channels Njoi has channels that cater to the Indian community as well as focusing on education Type Media Prima Astro Malay TV3, TV9 Prima, Oasis Chinese 8TV, NTV7 AEC, Jia Yu, CCTV-4 Tamil - Vaanavil, Makkal Education - Xiao Tai Yang, Tutor TV News - Awani, Bernama Source: Company, Alliance Research 10

11 FORECAST, VALUATION & RECOMMENDATION Slower earnings growth on weaker adex trend Weaker outlook for adex in FY12-13, but pickup in FY14 We expect Media Prima earnings growth to be relatively flat in FY12 and FY13, mainly due to a weaker outlook for adex. By FY14, there should be some pick-up in adex (especially TV) and earnings due to adex-friendly events such as the FIFA World Cup. See Figure 22 for our adex growth assumptions for Media Prima TV and newspapers segments. Some respite from lower newsprint costs Apart from rising adex, newspaper segment also benefit from lower newsprint costs In line with current trend, we expect newsprint cost for Media Prima to be lower at US$650/tonne in FY12-14, down from US$730/tonne recorded in Based on data from RISI, the lower price trend for newsprint is largely due to an overcapacity in the global newsprint industry currently, arising from steep demand declines in US and EU, a slowdown in growth from Asia, and new capacity coming up in developing markets. For RM/US$ exchange rate, our economist team expect it to remain relatively stable at RM /US$ in FY12-14 vis-a-vis FY11 s average of RM3.06/US$. Overall, the underlying key assumptions of our forecasts are summarised below. Figure 22 : Key assumptions 2010A 2011A 2012F 2013F 2014F Adex growth (%) TV Newspapers Newsprint cost (US$/tonne) RM/US$ exchange rate Source: Company, Alliance Research Dividend payout We estimate 60% dividend payout for Star Media Prima has a dividend payout policy ranging from 25-75%. We forecast a 60% dividend payout ratio for FY12-14, in line with its payout ratio in 2010 (excluding special dividend). The yearly dividend payment of RM m is comfortably covered by its annual free cashflow of RM m. Initiating coverage with Neutral recommendation Initiate coverage with NEUTRAL and TP of RM2.52 We value Media Prima at RM2.52 based on target P/E of 12x FY13 earnings, in line with its historical average and our target P/E for the sector. Unresolved Eurozone debt crisis, lack of major adex-friendly events, and potential subsidy rationalisation post general election are expected to crimp overall adex growth in 2013, impacting the more sensitive TV segment of Media Prima, but fortunately balanced out by its still growing Malay-language newspapers in the print segment. Hence, we initiate coverage with a NEUTRAL recommendation. Key catalyst for Media Prima will be introduction of new channels upon full implementation of DTTB, while Astro s potential aggressive move to grow its TV adex will be a key risk. Net dividend yield for Media Prima is expected to be about 5.1%, which is decent and comparable to peers. 11

12 Media Prima Financial Summary Price Date: 02 October 2012 Balance Sheet Income Statement FYE Dec FY10 FY11 FY12F FY13F FY14F FYE Dec FY10 FY11 FY12F FY13F FY14F PPE Revenue 1, , , , ,795.1 Intangibles EBITDA Inventories Depn & amort (100.7) (97.6) (99.4) (99.6) (99.9) Receivables Net interest expense (28.2) (23.5) (23.4) (22.2) (21.0) Other assets Associates & JV Deposit, bank and cash EI Assets 2, , , , ,721.9 Pretax profit Taxation (44.7) (72.1) (75.9) (79.6) (86.3) LT borrowings Discotinued operation (1.6) ST borrowings MI (6.7) (2.0) (2.1) (2.2) (2.4) Payables Net profit Other liabilities Adj net profit Liabilities , , , ,060.2 Key Statistics & Ratios Share capital 1, , , , ,068.2 FYE Dec FY10 FY11 FY12F FY13F FY14F Reserves Shareholder's equity 1, , , , ,636.5 Growth MI Revenue 107.9% 4.9% 3.7% 2.7% 3.9% Equity 1, , , , ,661.7 EBITDA 19.0% -4.7% 3.6% 3.2% 5.8% Pretax profit 7.1% -5.3% 4.5% 4.8% 8.4% Equity and Liabilities 2, , , , ,721.9 Net profit 24.4% -14.3% 3.1% 4.8% 8.4% Adj EPS 16.8% -19.2% 3.1% 4.8% 8.4% Cash Flow Statement FYE Dec FY10 FY11 FY12F FY13F FY14F Profitability Profit before taxation EBITDA margin 27.0% 24.6% 24.5% 24.7% 25.1% Depreciation & amortisatio Net profit margin 15.7% 12.8% 12.7% 13.0% 13.6% Changes in working capital 29.4 (57.4) (1.2) (2.9) (4.2) Effective tax rate 15.1% 25.8% 26.0% 26.0% 26.0% Net interest received/ (paid ROA 11.6% 8.9% 8.8% 8.9% 9.2% Share of associates & JV pro (6.2) (2.1) (2.0) (2.0) (2.0) ROE 22.9% 16.0% 15.4% 15.2% 15.5% Tax paid (51.6) (61.2) Others (15.3) (8.7) Leverage Operating Cash Flow Debt/ Assets (x) Debt/ Equity (x) Capex (70.7) (91.9) (100.0) (100.0) (100.0) Net debt/ equity (x) Net Cash Net Cash Net Cash Net Cash Net Cash Others Investing Cash Flow (55.9) (77.3) (100.0) (100.0) (100.0) Key Drivers FYE Dec FY10 FY11 FY12F FY13F FY14F Issuance of shares Adex growth - TV (%) Changes in borrowings (51.6) (49.4) Adex growth - Newspaper (%) Dividends paid (96.5) (97.9) (128.4) (134.6) (146.0) Others (30.9) (42.1) Newsprint cost (US$/tonne) Financing Cash Flow (163.0) (78.5) (128.4) (134.6) (146.0) RM/US$ exchange rate Net cash flow Valuation Forex FYE Dec FY10 FY11 FY12F FY13F FY14F Beginning cash EPS (sen) Restricted cash/overdraft Adj EPS (sen) Ending cash P/E (x) EV/ EBITDA (x) Net DPS (sen) Yield 4.2% 6.7% 5.1% 5.3% 5.7% BV per share (RM) P/BV (x)

13 DISCLOSURE Initiating Coverage Media Prima 3 October 2012 Stock rating definitions Strong buy - High conviction buy with expected 12-month total return (including dividends) of 30% or more Buy - Expected 12-month total return of 15% or more Neutral - Expected 12-month total return between -15% and 15% Sell - Expected 12-month total return of -15% or less Trading buy - Expected 3-month total return of 15% or more arising from positive newsflow. However, upside may not be sustainable Sector rating definitions Overweight Neutral Underweight - Industry expected to outperform the market over the next 12 months - Industry expected to perform in-line with the market over the next 12 months - Industry expected to underperform the market over the next 12 months Commonly used abbreviations Adex = advertising expenditure EPS = earnings per share PBT = profit before tax bn = billion EV = enterprise value P/B = price / book ratio BV = book value FCF = free cash flow P/E = price / earnings ratio CF = cash flow FV = fair value PEG = P/E ratio to growth ratio CAGR = compounded annual growth rate FY = financial year q-o-q = quarter-on-quarter Capex = capital expenditure m = million RM = Ringgit CY = calendar year M-o-m = month-on-month ROA = return on assets Div yld = dividend yield NAV = net assets value ROE = return on equity DCF = discounted cash flow NM = not meaningful TP = target price DDM = dividend discount model NTA = net tangible assets trn = trillion DPS = dividend per share NR = not rated WACC = weighted average cost of capital EBIT = earnings before interest & tax p.a. = per annum y-o-y = year-on-year EBITDA = EBIT before depreciation and amortisation PAT = profit after tax YTD = year-to-date 13

14 DISCLAIMER Initiating Coverage Media Prima 3 October 2012 This report has been prepared for information purposes only by Alliance Research Sdn Bhd (Alliance Research), a subsidiary of Alliance Investment Bank Berhad (AIBB). This report is strictly confidential and is meant for circulation to clients of Alliance Research and AIBB only or such persons as may be deemed eligible to receive such research report, information or opinion contained herein. Receipt and review of this report indicate your agreement not to distribute, reproduce or disclose in any other form or medium (whether electronic or otherwise) the contents, views, information or opinions contained herein without the prior written consent of Alliance Research. 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