1QCY12 advertising expenditure (adex) came in at RM1.77bn,declining slightly by 3.8% y-o-y. We deem this within expectations, asadvertisers typically plan their budgets in 1Q and an early CNY this yearcompelled them to bring forward most of their spending to 4QCY11 (adexq-o-q:  -18.9%).    Despite the slight y-o-y adex deteriorationin 1Q, we are maintaining our OVERWEIGHT call for the sector in anticipation ofa strong rebound in 2HCY12 during which some major events, such as 2012Olympics, Euro 2012 and the highly anticipated General Election, could takeplace. Hence, we maintain our Adex growth forecast for this year at 2x our FY12house GDP growth projection of 5.2%. We are maintaining the status quo of MediaChinese (BUY, FV RM1.47) as the sector's top pick.

Adex growth withinexpectations. AC Nielsen Research reported a 1QCY12 adex that amountedRM1.77bn, representing a decline of 3.8% y-o-y and 18.9% q-o-q. This is withinour expectations, as advertisers tend to be sceptical in 1Q, adopting await-andsee attitude while in the midst of finalizing their advertisingbudgets. Besides, advertisers had also brought forward some of theiradvertising spending (ad-spend) to Dec 2011 in light of the early Chinese NewYear (CNY) in January this year. The three core media platforms namelynewspapers, free-to-air (FTA) TV and radio saw a y-o-y decline in adex growthof 1.1%, 10.6% and 2.3% to RM974.2m, RM583.6m and RM89.6m respectively. Adex onthe other media platforms such as cinema, outdoor media and Internet grew19.8%, 21.3% and 9.8% y-o-y respectively. 

March saw a strongrebound, maintaining our 2012 adex growth forecast.  For March, adex growth across the mediaplatforms rebounded strongly with FTA TV, newspaper, megazines and radio segmentsurging by 31.7%, 33.4%, 21.3% and 72.9% respectively on a m-o-m basis. Webelieve 2012 will be a decent year for the sector in view of the upcoming majorsports 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 growthto 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 ongoingEconomic Transformation Programme efforts. We like Media Chinese (BUY, RM1.47),which is currently trading at an attractive FY12 PER of 10.4x, with a lucrativedividend yield of 5.8%. We also favour Media Prima (BUY, FV RM3.01), consideringthat it is Malaysia's largest integrated media player, with a leading position inthe FTA TV segment and a strong print media business being led by Harian Metro andBerita Harian. There is also strong potential adex growth for its FTA TV segmentshould the negotiations on the content-sharing rates between the Pay and FTA TVoperators succeed. The MCMC announced on 19 April 2012 that FTA TV operatorsare 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 theInternet had became the fastest growing media platform of late, registering a 20%y-o-y growth for full-year 2011 and  a9.8% 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 valuationis currently looking rich (trading at 13x FY12 PER), compared to its closestpeer ' Media Chinese.

Source: OSK188