KUALA LUMPUR (Jan 19): CIMB Research is positively surprised by the Media Prima Bhd’s joint-venture (JV) partnership with Korean-based CJ O Shopping Co (CJO) to establish a home-shopping business.

“We believe the venture will assist Media Prima diversify its business segments and leverage its viewership base,” the research house said in its research note Jan 18.

Yesterday, Media Prima announced its wholly-owned subsidiary Sistem Televisyen Malaysia Bhd (STMB) will hold a 51% stake in the JV company, while CJO will hold the remaining 49%.

Media Prima could invest up to RM33.2 million in the JV, and expects the new home-shopping business to start in second quarter of 2016.

“We think this is feasible, given that it already has an existing setup of home-shopping slot, called “Jom Singgah”, airing daily on TV3 in the afternoon. Management believes the new venture will provide Media Prima an attractive opportunity to participate in the Malaysian retail market,” CIMB said.

Citing Nielsen’s Audience Measurement survey, CIMB noted that Media Prima’s four television (TV) channels captured nearly 38% of the nation’s total audience share in cumulated nine-month period in 2015 (9M2015). TV3 has the single highest viewership base of about 22%.

“Media Prima could be looking to utilise its non-prime time slots, given that the majority or 73% of its TV revenue comes from prime time hours. But if the home-shopping goes to non prime time slots, it may not be able to attract a large audience,” CIMB said.

“Moreover, Media Prima does not have the channel capacity to dedicate to the home-shopping segment during prime time hours, unlike Astro (Astro Malaysia Holdings Bhd). Therefore, Media Prima may require a longer gestation period, before it sees a meaningful contribution from the venture,” it added.

CIMB maintained a “Hold” call on Media Prima, with an unchanged target price of RM1.41.

“We expect improvements in operating efficiencies, following the company’s cost-saving initiatives and better traction from non-traditional platforms, such as radio and outdoor. While the stock offers an attractive financial year ending Dec 31, 2016 (FY16) dividend yield of 5.9%, we prefer Astro for exposure to the media sector,” it said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)