Friday 29 Mar 2024
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Media Sector
Maintain neutral:
After a brief respite in February 2015, total gross advertising expenditure (adex) resumed its year-on-year (y-o-y) decline in March this year by easing 7% y-o-y. Recall that the March 2014 base was already low due to the MH370 tragedy. That March 2015 total gross adex still eased y-o-y exhibits that sentiment is still poor. We understand that smaller advertisers held back on ad spend before the 6% goods and services tax (GST) was implemented on April 1.

For the three months ended March (3M15) total gross adex eased 5% y-o-y, which is in line with our 2015 forecast. Free-to-air (FTA) TV adex and newspaper adex for 3M15 eased 6% y-o-y and 7% y-o-y respectively. Radio adex is the only major medium to have avoided y-o-y contraction year-to-date (YTD) as its 3M15 adex grew 2% y-o-y. During times of poor sentiment, advertisers usually migrate part of their ad spend from FTA TV and newspaper to radio, which is cheaper.

We are keen to discover how the 6% GST has impacted April 2015 total gross adex. Our initial observations are that consumer and, by extension, adex sentiment remain weak. The more pertinent question is whether the 6% GST will deepen the 3M15 y-o-y easing in adex or not. We have assumed that the 2015 adex for the media companies under our coverage will ease 5% y-o-y.

Earnings visibility for media companies may be poor and there may be downside risk to earnings if industry adex eventually falls more than our 5% y-o-y forecast. We will have a better idea when the April 2015 adex figures are released in late May. Ex-Astro, the share prices of media companies have eased approximately 5% over the last 30 days, ostensibly on GST fears, yielding more than 10% upside potential

That said, we will wait until the April 2015 adex figures are released and we meet the respective managements before reviewing our calls. Meanwhile, we note that the media companies (save for Astro) are trading at more than 1.5 times 12-month brought forward price-to-book value. Therefore, valuations are not demanding. We maintain our “neutral” call on the media sector. We rate all the media companies under our coverage at hold. — Maybank IB Research, April 27

Malaysia-Media-28apr15

This article first appeared in The Edge Financial Daily, on April 28, 2015.

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