Wednesday 21 November 2012

Media - Momentum improved


We are maintaining our NEUTRAL view on the media sector. YTD October gross adex grew by +3.7% YoY (or +8.2% MoM), in line with the market expectation. Going forward, we expect the total adex spending continue to grow in the remaining two months in year-2012 as advertisers will be rushing to finish its yearly advertisement budget and reach our full-year adex growth rate estimate of 7.5% YoY (based on 1.5x GDP multiplier). No change in our media companies’ earnings forecast for now, pending on their respective upcoming 3QCY12 results released. We maintained our OUTPERFORM rating on Media Chinese International (“MEDIAC”) with an unchanged target price of RM1.36 based on targeted FY13 PER of 12.1 (+1SD). Meanwhile, our Star Publications (“STAR”) and Media Prima (“MEDIA”) target prices continue to keep at RM3.15 and RM2.34, respectively, based on unchanged targeted FY13 PERs of 13.0x and 13.4x. Maintained MARKET PERFORM calls on both STAR and MEDIA.

The YTD October gross adex grew by +3.7% YoY to RM9.0b according to Nielsen. The higher YTD growth was mainly driven by the Pay TV (+15.3%) and FTA TV (+1.8%) segments but was partially offset by the lower contribution from the Newspaper (-1.1%) segments. The higher YTD performance in the Pay TV segment, we believe, was likely due to the higher discount thus attracting some FTA TV advertisers to shift their spending. On the month-on-month basis, total adex surged by 8.2% thanks to higher adex spending in the Pay TV (+14.9% MoM); FTA TV (+11.1% MoM) and newspaper (+1.2% MoM) segments, as advertisers rushing to finish its annual adex budget towards the year-end. On the market share front, newspaper continued to command the lion's share but with a lower quantum of 39.3% (vs. 41.1% a year ago) followed by 27.6% (vs. 28.1%) for FTA and 24.6% (vs. 22.1%) for Pay TV.

Newspaper YTD gross adex was lowered by 1.8% YoY to RM3.1b. The relatively weak performance was mainly caused by the contraction in both the English (-6.9% YoY) and Chinese (-0.2% YoY) segments but was partially offset by higher contributions from the Malay (+2.9% YoY) segment. All the language's newspapers have recorded a positive MoM growth during October. English’s newspaper was recorded the strong MoM growth of 2.5% followed by Chinese (+1.9%) and BM (+1.1%). MEDIAC, STAR and MEDIA’s newspaper gross adex recorded a +3.6% YoY, -11.0% YoY and -2.8% YoY in October. The sharp YoY drop in STAR was mainly due to the continued lack of confidence by advertisers, in our view, despite the company’s readership and circulation numbers have shown some signs of recovery.

YTD Pay TV gross adex continued to gain 15.3% YoY to RM2.2b at the expense of FTA TV, which improved a merely 1.8% YoY. On a MoM basis, both Pay and FTA TV adex were climbed by 14.9% and 11.1%, respectively. We suspect the surged, to certain extend, was due to the higher discount rate provided by TV operators thus increased advertisers’ appetite. MEDIA’s gross TV adex was surged by 20.5% YoY (or 12.0% MoM) to RM253m in October, thanks to the strong performance in all of its channels, namely 8TV (+28.4% YoY to RM49m); NTV7 (+15.2% YoY to RM40m); TV3 (+8.9% YoY to RM121m); and TV9 (+65.3% YoY to RM43m). On the Pay TV front, Astro RIA; Astro Prima; and Astro Wah Lai Toi channels continued to rank the top three highest adex generators and contributed an aggregate RM861m total gross adex or 39% of the total YTD Pay TV gross adex of RM2.2b. On market shares front, Pay TV segment has improved 310 basis points YoY to 47.1% in the total YTD TV adex at the expense of the FTA TV segment.

Source: Kenanga

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