- The YTD June Adex report released by Nielsen Media Research shows that overall Adex continues to grow. Total gross Adex in the first 6 months grew by 18.3% YoY, reaching RM6.0bil against RM5.1bil in 1HCY12. However, this takes into account additional Pay TV channels monitored by Nielsen, which have distorted the comparison of Adex figures.

- Stripping off the additional Pay TV channels, the industry saw a YoY Adex growth of 5.1% for 1HCY13, mainly supported by a growth of 13.6% for Pay TV Adex and 7.1% for FTA TV Adex. On a monthly basis, the sector saw a marginal MoM Adex growth of 3.8%.

- Newspaper Adex remains lacklustre with a slight decline of 0.1% YoY. The YTD June market share of newspaper Adex stands at 34%, compared with 41% in the same period last year. The market share of Pay TV and FTA are 34% and 24%, respectively.

- We deem this to be in line with our expectations that Adex should gradually pick up in the second half as sentiment improves, followed by a stronger recovery in CY14. The seasonality effect should also give the sector a boost as advertisers exhaust their budgets towards year-end.

- Going forward, we believe that Adex growth would be backed primarily by the TV segment (both FTA and Pay TV), as the trend suggests that it would continue to outpace newspaper Adex.

- We have assumed an Adex-GDP growth multiplier of 1.2x for CY13 which equates to an Adex growth of 6.4%, and 1.5x for CY14-15. Based on our estimates, earnings of the media sector is projected to grow by 8.7% in CY13 followed by 11.2% in CY14.

- We maintain our OVERWEIGHT stance on the sector. Media Prima (FV: RM3.17/share) remains our top pick, as we believe the group will benefit directly from an Adex growth trend that is skewed towards the TV segment, combined with its decent dividend yield of 5%. We also like Media Chinese International (FV: RM1.45/share) for its strong market share (in excess of 85%) within the Chinese-language newspaper segment and a dividend yield of 5%. Star Publications remains attractive for its good dividend yield of 6.5%.

- We maintain HOLD on Astro Malaysia (FV: 3.08/share). Although we are positive on the group’s strong in-house production capabilities and its high TV household penetration rate, we believe Astro will be weighed by its heavy capex cycle that will only peak in FY15F.

Source: AmeSecurities