We are maintaining our NEUTRAL view on the media sector. The YTD May gross adex surged by +17.9% YoY thanks to higher contributions from the Pay TV (+67.6%) and FTA TV (10.4%) segments, although they were partially offset by a relative sluggish performance of the Newspaper (-0.3%) segment. On a MoM basis, May’s gross adex improved by +15.3% as a result of the rising General Election (“GE”) fever and various sport events in the month. There is no change in our targeted 8.0% annual gross adex growth rate for now despite the strong YTD adex performance. We believe that the consumers’ spending sentiment could potentially turn lower in the next few months as a  result of the upcoming cost push effect that would be mainly led by the various subsidies' rationalisation plans. Nevertheless, we may revisit our number should the adex growth momentum remain resilient in the next 1-2 months. There are no changes to our media companies’ CY13-CY14 earnings forecasts. We are reiterating our OUTPERFORM call on Astro Malaysia Holdings (“ASTRO”, TP: RM3.29) while maintaining our MARKET PERFORM ratings on Media Chinese International (“MEDIAC”, TP: RM1.23), Star Publications (“STAR”,  TP: RM2.87) and Media Prima (“MEDIA”, TP: RM2.72).   

YTD May gross adex continues to growth by double-digit to RM4.8b (+17.9%) according to Nielsen.  The strong YTD adex growth continued to be led by the higher contribution from the TV segment (Pay TV rose (+67.7% YoY); FTA (+10.4% YoY)). The newspaper gross adex, however, was relatively sluggish at -0.3% to RM1.7b. Delving deeper, the higher YTD PAY TV segment was mainly due to an  additional 15 channels (to 27 channels) being gradually included into Nielsen’s Pay TV segment portfolio since July last year. Stripping off the additional channels effect, the Pay TV segment grew +11.2% YoY to RM1.07b as of YTD May. On a MoM basis, the total gross adex growth surged by +15.3% (vs. -0.1% in April), thanks to the higher contribution from the TV segment that was mainly led by the rising GE fever and various sport events in the month (i.e. UEFA league 2013 semi & final matches, etc.) On the market share, Pay TV continued to grow its share to 33.4% (vs. 23.5% a year ago) at the expense of the newspaper (34.9% vs. 41.3%), FTA TV (24.4% vs. 26.0% previously) and radio segments (3.7% vs. 4.1%). 

Newspaper May gross adex slips to RM314.3m (-3.8% YoY). The lower growth in the Newspaper segment was mainly led by the weaker performance in both the English (-13.2% YoY) as well as BM (-3.3% YoY) segments. This, however, was partially cushioned by a higher adex growth in the Chinese (+14.1% YoY) segment. On a MoM comparison, Englishlanguage newspaper was the only segment that continued to go south by recording a lower growth of -3.3% (April: -10.7%) while the other two languages newspaper - (BM: +0.9%) and (Chinese: +1.8%) - resumed their growth momentum in May. We opine that the continued weaker adex momentum, to a certain extent, in the English newspaper segment was due to the ongoing print-to-digital migration trend. On the newspaper incumbents, MEDIA and MEDIAC’s May newspaper gross adex improved by 4.3% and 1.5% MoM respectively while STAR continued to suffer a lower growth rate of -2.4% MoM (April: -14.6% MoM). 

For the YTD, Pay TV and FTA TV continue to growth to RM1.6b (+67.5% YoY) and RM1.2b (10.4% YoY) respectively. On a MoM basis, Pay TV adex continued to advance by 31% while FTA TV adex was up by +15.9% as a result of the rising GE fever as well as the various sport events shown on Astro’s supersport channels. MEDIA’s May gross TV adex has improved by 16.3% MoM to RM244m. 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 with an aggregate contribution of RM516m in gross adex or 32% of the total YTD Pay TV gross adex.

2013 adex outlook remains unchanged.  We reiterate our neutral view on the sector despite the continuing strong YTD gross adex growth. While we are keeping our targeted annual gross adex growth rate of 8.0% for now (in view of the potential cost push effect post the GE likely to be led by the various subsidies' rationalisation plans), we may adjust our estimate should the strong adex growth momentum continue in the next 1-2 months.

Source: Kenanga