1QCY12 advertising expenditure (adex) came in at RM1.77bn,
declining slightly by 3.8% y-o-y. We deem this within expectations, as
advertisers typically plan their budgets in 1Q and an early CNY this year
compelled them to bring forward most of their spending to 4QCY11 (adex
q-o-q: -18.9%). Despite the slight y-o-y adex deterioration
in 1Q, we are maintaining our OVERWEIGHT call for the sector in anticipation of
a strong rebound in 2HCY12 during which some major events, such as 2012
Olympics, Euro 2012 and the highly anticipated General Election, could take
place. Hence, we maintain our Adex growth forecast for this year at 2x our FY12
house GDP growth projection of 5.2%. We are maintaining the status quo of Media
Chinese (BUY, FV RM1.47) as the sector’s top pick.
Adex growth within
expectations. AC Nielsen Research reported a 1QCY12 adex that amounted
RM1.77bn, representing a decline of 3.8% y-o-y and 18.9% q-o-q. This is within
our expectations, as advertisers tend to be sceptical in 1Q, adopting a
wait-andsee attitude while in the midst of finalizing their advertising
budgets. Besides, advertisers had also brought forward some of their
advertising spending (ad-spend) to Dec 2011 in light of the early Chinese New
Year (CNY) in January this year. The three core media platforms namely
newspapers, free-to-air (FTA) TV and radio saw a y-o-y decline in adex growth
of 1.1%, 10.6% and 2.3% to RM974.2m, RM583.6m and RM89.6m respectively. Adex on
the other media platforms such as cinema, outdoor media and Internet grew
19.8%, 21.3% and 9.8% y-o-y respectively.
March saw a strong
rebound, maintaining our 2012 adex growth forecast. For March, adex growth across the media
platforms rebounded strongly with FTA TV, newspaper, megazines and radio segment
surging by 31.7%, 33.4%, 21.3% and 72.9% respectively on a m-o-m basis. We
believe 2012 will be a decent year for the sector in view of the upcoming major
sports events as well as the nation’s highly-anticipated General Election,
which is expected to be held in 2HCY12. That said, we expect 2012 adex growth
to be close to 2x our house 2012 GDP growth forecast of 5.2%.
Maintain OVERWEIGHT.
We remain positive on domestic consumer spending given the Government’s ongoing
Economic Transformation Programme efforts. We like Media Chinese (BUY, RM1.47),
which is currently trading at an attractive FY12 PER of 10.4x, with a lucrative
dividend yield of 5.8%. We also favour Media Prima (BUY, FV RM3.01), considering
that it is Malaysia’s largest integrated media player, with a leading position in
the FTA TV segment and a strong print media business being led by Harian Metro and
Berita Harian. There is also strong potential adex growth for its FTA TV segment
should the negotiations on the content-sharing rates between the Pay and FTA TV
operators succeed. The MCMC announced on 19 April 2012 that FTA TV operators
are now allowed to broadcast content obtained from the sole right holder,
ASTRO, based on reasonable commercial terms effective from 1 May 2012. We also see Catcha Media (BUY, FV RM1.03)
being a good buy as it is an Internet-based media company – noting that the
Internet had became the fastest growing media platform of late, registering a 20%
y-o-y growth for full-year 2011 and a
9.8% y-o-y growth for 1QCY12. Nonetheless, we are less keen on STAR (NEUTRAL,
FV RM3.33), which is facing a decline in readership and whose stock valuation
is currently looking rich (trading at 13x FY12 PER), compared to its closest
peer – Media Chinese.
Source: OSK188
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