- Total adex grew by 7% MoM (+30.5% YoY) in September, compared to a decline of 8% MoM in August, suggesting a recovery in the overall adex going into the final quarter of the year, which is seasonally the strongest due to yearend festive seasons and advertisers exhausting their budgets.

- On a YTD basis, 9MCY13 total gross adex saw a growth of 19.4%, largely backed by growth in Pay TV due to additional channels added during the period of comparison. Stripping off the additional channels, we see a healthy growth of 6.5% in the overall adex, while taking out the Pay TV segment entirely reveals a growth of 1.8%.

- Free-to-air (FTA) adex recorded an improvement in September, rising by 12.1% MoM and 3.1% YoY, after seeing contractions on a YoY basis in the last 3 months. Pay-TV continue to record the strongest growth, registering a YTD normalised (after stripping off additional channels) growth of 20%.

- Total newspaper adex grew by 3.7% as at YTD September, after seeing a strong growth in September (3.4% MoM, 19%YoY). Print adex for Chinese-language newspapers continues to be strong, maintaining its 5%-6% growth. English newspaper adex increased by 7%, while Malay newspaper adex declined by 1.8%.

- We remain cautious as planned adex spending and sentiments continue to be weak underpinned by uncertainties caused by the impending potential subsidy rationalisation measures and implementation of GST in the upcoming Budget 2014, as well as the recent fuel price hike.

- Furthermore, changes in technology and reading preference may lead to a gradual migration from print to digital media, providing readers with an alternative source of information. Print adex could be adversely impacted going forward if advertisers realign their advertising allocations to take into account of this trend. This is further underscored by the rise of certain classified websites, such as iProperty and JobStreet, which has managed to wrestle some classified adex from traditional newspapers.

- No changes to our estimates for now. We maintain NEUTRAL on the sector with BUY calls on:- (i) Media Prima (FV: RM3.17/share) due to its dominance in the FTA segment and its diversified and integrated media platform; and (ii) Media Chinese International (RM1.28/share) for its strong market position in the Chinese language segment which still sees a relatively decent adex growth.

- We maintain our HOLD recommendations on:- (i) Astro Malaysia (RM3.03/share) due to its heavy capital expenditure cycle that is yet to peak which will continue to weigh on its earnings trajectory in the near term; and (ii) Star Publications (RM2.78/share) as we expect earnings to remain uncertain due to weak adex growth and declining readership.

Source: AmeSecurities