- Bernama reported that the investigation on the import of newsprint in rolls from Belgium, Germany, Sweden and the United Kingdom based on section 26(1)(e) of the Countervailing and Anti Dumping Duties Act 1993 has been terminated.

- The Ministry of International Trade and Industry (Miti), in a statement, did not provide specific reasons for the termination, apart from saying that it “is in the public interest”.

- It was earlier reported that Malaysian Newsprint Industries Sdn Bhd had alleged that the prices of imported newsprint from the said countries were much lower than those of local products, and that imports from these countries had increased in terms of absolute quantity.

- Going forward, with the investigation overhang resolved, newspaper producers will therefore continue to benefit from the current spot newsprint price that remains on a downward trend, in our view. Spot newsprint was last traded at USD590/MT, at its 2-year low.

- We understand that newsprint accounts for about 35-40% of the total costs.

- We believe that newspaper producers with shorter newsprint policies stand to gain more from the favourable price moment. Media Prima (MPrima) has the shortest newsprint policy of only 3-6 months, followed by Media Chinese International (MCIL) with a policy of 6-8 months. Star Publications (Star), however, has 16 months worth of stockpile, effectively insulating it from any current price movements.

- However, we understand from our channel checks that the media players only import half of their inventories with the other half being sourced locally, due to the existing import duties in place. We have currently assumed a newsprint cost (inclusive of freight and duty charges) of between US$650/MT and US$700/MT.

- Nonetheless, we gather that the newsprint tariff is due for review in September (done every 5 years), in which Miti will then decide if there are any changes to the current level of tariffs levied upon the newsprint by foreign producers.

- We maintain our OVERWEIGHT stance on the media sector. We have buys on MPrima (FV: RM3.17/share), MCIL (FV: RM1.45/share) and Star (FV: RM3.10/share). Astro remains a hold with a FV of 3.08/share.  

Source: AmeSecurities