We are maintaining our NEUTRAL view on the media sector. The YTD April gross adex surged by +17.2% YoY on the back of the rise in the Pay TV (+63.2%), FTA TV (11.6%) and Newspaper (+0.7%) segments. On a MoM basis, April’s gross adex surprisingly closed flat at -0.1% despite the  rise in the General Election (“GE”) fever. We believe the lukewarm adex performance in the month was mainly due to a cautious view taken by advertisers  prior the GE even while political parties were spending substantial money on adex to promote their respective election manifestos. There is no change in our targeted 8.0% annual gross adex growth rate despite the strong YTD adex  performance. We believe that consumers’ spending sentiment could potentially turn lower in the next few months as a result of the upcoming cost push effect that will be mainly led by the various subsidy rationalisation plans. There are no changes in our media companies’ CY13-CY14 earnings forecasts pending their upcoming 1QFY13 results release. We reiterate our OUTPERFORM calls  on Media Chinese International (“MEDIAC”, TP: RM1.23), Astro Malaysia Holdings (“ASTRO”, TP: RM3.29) and Star Publications (“STAR”, TP: RM2.94)  while maintaining our MARKET PERFORM rating on Media Prima (“MEDIA”, TP: RM2.72).   

YTD April gross adex continues to record double-digit growth by +17.2% YoY to RM3.7b. The strong YTD adex growth was mainly driven by the Pay TV (+63.2%), FTA TV (+11.6%) and the Newspaper (+0.7%) segments. Delving deeper, the higher YTD PAY TV segment was mainly due to an additional 15 channels (to 27 channels) being added to Nielsen’s Pay TV segment portfolio since April last year. Stripping off the additional channels effect, the Pay TV segment still grew +10.3% YoY to RM799m as of YTD April. On a MoM basis, the total adex growth was surprisingly flat at -0.1% (vs. +12.4% in March) despite the rise in the GE fever. This suggested that advertisers were generally taking a cautious view prior to the GE even while political parties were spending substantial money on adex to promote their respective election manifestos. On the market shares, Pay TV continued to grow its share to 32.0% (vs. 23.0% a year ago) at the expense of the newspaper (36.1% vs. 42.0% previously) and FTA TV segments (24.6% vs. 25.8% previously). 

Newspaper’s April gross adex grew marginally to RM353m (+0.7% YoY).  The relatively marginal growth in the Newspaper segment was mainly driven by the higher Chinese (+14.1% YoY) and BM (+0.9% YoY) segments, but these were offset by the lower contribution from the English (-4.5% YoY) segment. On a MoM comparison, all the language newspapers recorded a negative growth in April - BM (-1.3% MoM), Chinese (-4.8% MoM) and English (-10.7% MoM) - no thanks to the cautious approach taken by advertisers. On the newspaper incumbents, MEDIAC’s April newspaper gross adex was lower by -5% MoM while both STAR and MEDIA suffered lower growth rates of  -14.6% MoM and -7.3% MoM respectively. 

YTD Pay TV and FTA TV continue to climb. The two segments’ gross adex continued to growth by 63.2% YoY and 11.6% YoY to RM1.2b and RM907m respectively. On a MoM basis, Pay TV adex continued to advance by 10% while FTA TV adex softened by -5.1% in tandem with the general wait-and-see approach taken by advertisers ahead of the GE. MEDIA’s April gross TV adex meanwhile fell by -4.4% MoM to RM210m. On the Pay TV front, Astro PRIMA, Astro RIA and Astro Wah Lai Toi channels continued to rank as the top three highest adex generators as they contributed an aggregate of RM1.1b in gross adex or 36% of the total YTD Pay TV gross adex. On market shares, the Pay TV segment has improved by 950bps YoY to 56.6% at the expense of the FTA TV segment. 

2013 adex outlook remains unchanged. Despite the YTD gross adex growth remaining strong, we are reiterating our neutral view on the sector. There is no change in our targeted annual gross adex growth rate of 8.0% in view of the potential cost push effect post the GE that will likely be led by the various subsidy rationalisation plans.

Source: Kenanga