Media Prima Berhad's Dividend Sustainability Amid Earnings Declines: Balancing Historical Cash Flow and Future Uncertainty

Media Prima Berhad (KLSE:MEDIA) has long been a staple for income-focused investors, offering a consistent dividend history despite a decade-long decline in payout amounts. However, the company’s ability to sustain its current dividend of RM0.015 per share—set to be distributed on October 8, 2025—now faces scrutiny amid deteriorating earnings and cash flow dynamics. This article examines the tension between Media Prima’s historically robust operating cash flow and the growing uncertainty surrounding its future profitability.

Historical Cash Flow: A Foundation for Dividend Payments

Media Prima’s operating cash flow has historically provided a buffer for dividend sustainability. For instance, in 2021, operating cash flow surged to MYR 264.87 million, enabling a positive free cash flow of MYR 49.79 million [2]. Even in 2024, operating cash flow remained at MYR 158.99 million, supporting a free cash flow of MYR 33.81 million [3]. These figures suggest the company has, at times, generated sufficient liquidity to fund dividends without overreliance on debt.

However, recent data reveals a concerning shift. For the trailing twelve months (TTM) ending in 2025, levered free cash flow turned negative at -MYR 106.05 million, while operating cash flow stood at MYR 216.71 million [3]. This discrepancy highlights the strain of capital expenditures and debt servicing, which could erode the company’s ability to maintain dividend payments if operating cash flow declines further.

Earnings Deterioration and Structural Risks

Media Prima’s earnings have deteriorated sharply in recent years. For FY2025, net income fell by 65% year-on-year to MYR 21.0 million, with a net profit margin collapsing from 7.0% in FY2024 to 2.5% [1]. Analysts project that FY2026 earnings per share (EPS) will remain stagnant at MYR 0.02, with revenue estimates ranging between MYR 776.4 million and MYR 901.4 million [1]. This flat growth trajectory is compounded by a debt-to-equity ratio of 43.68% and a payout ratio of 41.6% for FY2025 [1], which could balloon to 110% if earnings continue to contract [2].

The company’s reliance on advertising revenue further exacerbates these risks. Advertising revenue—a core driver for Media Prima—has declined, with the broadcasting segment reporting a 16% revenue drop in Q1 2025 due to weaker TV ad sales [1]. While non-advertising revenue (e.g., home shopping, film distribution) grew 21% year-on-year, this diversification has yet to offset the broader earnings decline [1].

Industry Challenges and Strategic Buffers

The Malaysian media industry is grappling with systemic headwinds, including digital disruption and macroeconomic volatility. Digital advertising now accounts for 76% of total ad revenue in Malaysia, with mobile-first strategies dominating due to high smartphone penetration [4]. Media Prima’s traditional advertising model is thus under pressure, as competitors pivot to digital-first platforms.

Yet, the company has taken steps to mitigate these challenges. Initiatives like content premiumisation and expansion into non-advertising revenue streams offer a buffer. For example, the omnia business segment saw a 21% year-on-year growth in non-advertising revenue in FY2025 [1]. Analysts from Hong Leong Investment Bank have upgraded the stock to “Buy,” citing these diversification efforts and tailwinds from the “Visit Malaysia 2026” campaign [5].

The Dividend Dilemma: Past Strength vs. Future Uncertainty

Media Prima’s dividend yield of 4.17% in 2025 is attractive, but its sustainability hinges on reconciling historical cash flow strength with future earnings uncertainty. While the company’s operating cash flow has historically supported dividends, the recent shift to negative free cash flow raises red flags. For instance, the TTM free cash flow of -MYR 106.05 million in 2025 suggests the company may need to rely on external financing or asset sales to maintain payouts [3].

Moreover, the payout ratio’s projected jump to 110% in FY2026—if earnings continue to decline—would render the dividend unsustainable under traditional metrics [2]. This scenario is plausible given the company’s thin profit margins (2.45% net margin in FY2025) and its inability to pass on cost increases to advertisers [1].

Conclusion: A Cautionary Income Play

Media Prima Berhad’s dividend history and current yield make it an appealing income stock, but investors must weigh these benefits against structural risks. The company’s operating cash flow has historically provided a safety net, yet declining earnings, negative free cash flow, and a fragile advertising business pose significant threats. While non-advertising revenue growth offers a buffer, it may not be sufficient to offset long-term earnings deterioration. For now, the dividend appears supported by a 41.6% payout ratio [1], but this could erode rapidly if industry conditions worsen. Investors should monitor the company’s ability to diversify revenue streams and manage debt while remaining cautious about over-reliance on its dividend yield.

Source:
[1] Media Prima Berhad's Dividend Sustainability Amid Earnings Deterioration [https://www.ainvest.com/news/media-prima-berhad-dividend-sustainability-earnings-deterioration-cautionary-income-play-2508/]
[2] Media Prima Berhad (KLSE:MEDIA) Is Paying Out A Dividend [https://uk.finance.yahoo.com/news/media-prima-berhad-klse-media-000305211.html]
[3] Media Prima Berhad (4502.KL) - Yahoo Finance [https://finance.yahoo.com/quote/4502.KL/key-statistics/]
[4] Malaysia Advertising Market Size, Share, Trends and ... [https://www.imarcgroup.com/malaysia-advertising-market]
[5] Media Prima Upgraded To 'Buy' After Non-Ad Revenue Expands [https://www.businesstoday.com.my/2025/08/28/media-prima-upgraded-to-buy-after-non-ad-revenue-expands/]