Media Prima Berhad's Dividend Sustainability Amid Earnings Deterioration: A Cautionary Income Play

Media Prima Berhad (KLSE:MEDIA) offers a tempting 4.17% dividend yield, but investors must scrutinize whether this income stream aligns with its deteriorating earnings. The company’s 41.6% payout ratio for 2025 suggests dividends are currently well-covered by earnings [2], yet underlying financial trends reveal a more nuanced picture.

Earnings Deterioration and Payout Ratio

For FY2025, Media Prima reported a profit attributable to shareholders of MYR 14.26 million, a 57% decline from MYR 33.21 million in FY2024 [6]. Despite this, the company maintained its annual dividend at 1.5 sen per share, unchanged from the prior year [3]. The 41.6% payout ratio implies that even with weaker earnings, the dividend remains within sustainable limits. However, this ratio masks structural challenges: the company’s trailing twelve months (TTM) net profit margin stands at 2.45%, and return on equity (ROE) is a modest 2.87% [2]. These metrics suggest thin profit margins, which could strain dividend sustainability if earnings continue to contract.

Revenue Diversification as a Buffer

Media Prima’s resilience stems from its shift toward non-advertising revenue streams. For FY2025, non-advertising revenue grew 21% year-on-year, driven by home shopping, film distribution, and content production [4]. This segment now accounts for a significant portion of total revenue, offsetting softer advertising demand. For instance, the company’s Q4 FY2025 results showed a 2% year-on-year revenue increase to MYR 222.5 million, with non-advertising growth cited as a key driver [1]. Analysts at Hong Leong Investment Bank highlight this diversification as a positive catalyst, upgrading the stock to HOLD and citing potential tailwinds from Visit Malaysia 2026 and improving consumer confidence [5].

Future Earnings Forecasts and Risks

Analysts project mixed outcomes for FY2026. The average EPS estimate is MYR 0.02, with revenue forecasts ranging from MYR 776.4 million to MYR 901.4 million [1]. While these figures imply modest growth, they also reflect uncertainty. Media Prima’s levered free cash flow remains negative at -MYR 106.05 million TTM [3], raising concerns about its ability to fund dividends without relying on debt or asset sales. The company’s debt-to-equity ratio of 43.68% [1] is manageable but could become a risk if interest rates rise or borrowing costs increase.

Dividend Yield vs. Fundamentals

The 4.17% yield appears attractive at first glance, but historical context tempers enthusiasm. Over the past decade, dividend payments have declined, and the payout ratio has fluctuated between 30% and 50% [4]. This volatility underscores the company’s reliance on earnings stability, which has been compromised in recent quarters. For example, Q4 FY2025 profit before tax fell 52% to MYR 17.5 million compared to the same period in 2024 [6]. While non-advertising revenue growth provides a buffer, advertising remains a critical component of Media Prima’s business, and its performance is tied to macroeconomic conditions.

Conclusion: A High-Yield Opportunity with Caveats

Media Prima’s dividend is not a red flag but neither is it a guaranteed income play. The 41.6% payout ratio and current yield are supported by earnings, but structural challenges—such as thin margins, declining advertising revenue, and negative free cash flow—pose risks. Investors should monitor the company’s ability to sustain non-advertising growth and navigate macroeconomic headwinds. For now, the yield offers a compelling opportunity for income-focused investors willing to accept moderate risk, provided they diversify their portfolios and remain vigilant about earnings trends.

Source:
[1] Media Prima Berhad (4502.KL) - Yahoo Finance [https://finance.yahoo.com/quote/4502.KL/key-statistics/]
[2] Media Prima Berhad Statistics - KLSE [https://stockanalysis.com/quote/klse/MEDIA/statistics/]
[3] Media Prima Bhd - KL:MPRM Financials [https://www.investing.com/equities/media-prima-bhd-financial-summary]
[4] 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/]