We are maintaining
our NEUTRAL view on the media sector. The full year gross adex for 2012 ended
the year on a softer note with a +5.9%
growth YoY as compared to our 7.5% forecast despite the support of a series of
adex-friendly events such as EURO 2012 and London’s Olympic in the year. The
main culprit was mainly caused by the weaker-than-expected adex growth in the
Newspaper segment. Moving forward, industry players are eyeing to record a
5%-8% annual gross adex growth rate in CY13, which is in line with our own
estimate of 8.0% (based on an unchanged targeted GDP multiplier of 1.7x). There
are no changes to our media companies’ CY12-CY14 earnings forecasts pending
their upcoming 4QCY12 results release. We reiterate our OUTPERFORM calls on
Media Chinese International (“MEDIAC”, TP: RM1.23) and Star Publications
(“STAR”, TP: RM3.11) while maintaining our MARKET PERFORM ratings on Media
Prima (“MEDIA”, TP:RM2.34) and Astro Malaysia Holdings (“ASTRO”,
TP:RM3.17).
The YTD December
gross adex grew by +5.9% YoY to RM11.4b according to Nielsen. The decent
YTD growth was mainly driven by the Pay TV (+20.6%) and FTA TV (+5.2%) segments
despite a lower contribution from the Newspaper (-1.2%) segment. We reckon that
the higher YTD PAY TV segment performance was
mainly due to the additional 10 channels (to 22 stations) added to
Nielsen’s Pay TV segment portfolio coupled with the higher discount rate, which
translated into higher adex spending. On a MoM basis, the total adex increased
by 7.2% on the back of the higher adex spending in the Radio (+13.0% MoM), FTA
TV (+7.3% MoM), Pay TV (+6.9% MoM) and newspaper (+6.9% MoM) segments amid
advertisers aggressive spending to meet their annual adex budget towards the
yearend. On top of that, the strong adex growth in December was also fuelled by
the higher spending in the In-Store segment (+15.1% MoM) as a result of the festive season and school-opening
period. On market share, Pay TV continued to grow its share to 26.1% (vs. 22.9%
a year ago) at the expense of the shrinking market share in newspaper segment (37.8%
vs. 40.5% previously). FTA TV’s market share, meanwhile, remained relatively
stable at 27.8% (28.0% previously).
Newspaper YTD gross
adex, meanwhile, fell by 1.9% YoY to RM3.8b. The relatively weak
performance in the Newspaper segment was mainly caused by the contraction in
both the English (-6.0% YoY) and Chinese (-0.4% YoY) segments, although this
was partially offset by the higher contribution from the Malay (+1.7% YoY)
segment. MEDIAC, STAR and MEDIA’s newspaper gross adex recorded a +0.4% YoY,
-8.4% YoY and -0.2% MoM growth in 4QCY12, respectively.
The YTD Pay TV gross
adex continued to gain by 20.6% YoY to RM3.0b at the expense of FTA TV,
which merely improved by only 5.2% YoY. On a MoM basis, both the Pay and FTA TV
adex climbed by 6.9% and 7.3% respectively. MEDIA’s gross TV adex meanwhile
surged by 10.4% YoY (or 7.2% MoM) to RM303m in December thanks to the strong
performance across its in-house channels namely 8TV (+11.0% YoY to RM58m), TV3
(+7.0% YoY to RM142m) and TV9 (+50.2% YoY to RM52m). On the Pay TV front, Astro
PRIMA, Astro RIA and Astro Wah Lai Toi channels continued to rank as the top
three highest adex generators as they contributed an aggregate RM1.1b in gross
adex or 36% of the total YTD Pay TV gross adex of RM3.0b. On market share, the
Pay TV segment has improved by 340 bps YoY to 48.4% at the expense of the FTA
TV segment.
2013 adex outlook.
In our view, the adex growth in 1QCY13 could be muted as advertisers tend to
conserve their A&P budget in the first two months coupled with the cautious
mode on the upcoming General Elections. For the full-year outlook, we
understand that the industry players are eyeing to record a 5%-8% annual gross
adex growth rate in CY13, which is in line with our own estimate of 8.0% (based
on an unchanged targeted GDP multiplier of 1.7x). While our CY13 adex growth
rate forecast seems bullish at this juncture, we believe that it is achievable
given the low base effect in CY12.
Source: Kenanga
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