Our NEUTRAL view on the media sector remains unchanged. The YTD July gross adex grew by 18.2% YoY to RM7.3b (vs. our 17.5% YoY estimate for the fullyear), mainly led by higher contributions from Pay-TV (72.2% YoY), FTA-TV (3.9% YoY) and newspaper (1.1% YoY). However, should we strip off the Pay-TV contribution, the YTD July total gross adex was only up by 1.2% YoY to RM4.7b. On MoM basis, July’s gross adex continued to advance but at a lower pace of +0.6% (vs +3.5% MoM in May), thanks to the higher contribution from the newspaper segment. The growth was, however, partially offset by declines in both the Pay-TV as well as FTA-TV segments due to lower Chinese advertisements spending by advertisers. There are no changes to our media companies’ CY13-CY14 earnings forecasts. We are reiterating our OUTPERFORM call on Astro Malaysia Holdings (“ASTRO”, TP: RM3.31) while maintaining our MARKET PERFORM ratings on both Media Chinese International (“MEDIAC”, TP: RM1.21), and Media Prima (“MEDIA”, TP: RM2.65). Our UNDERPERFORM rating on Star Publications (TP: RM2.46) remains unchanged.     

YTD July gross adex stood at RM7.3b (18.2% YoY) according to Nielsen. The strong TV segment adex contribution (35.9% YoY to RM4.3m) continued to be the key driver to the overall gross adex. On closer analysis, the TV segment was mainly boosted by the strong Pay-TV adex, which surged by 72.2% YoY (to RM2.5b), in contrast to the 3.9% YoY growth in the FTA-TV segment. The newspaper gross adex, meanwhile, grew by 1.1% YoY to RM2.5b. The stronger 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 only grew by 12.9% YoY to RM1.66b as of YTD July. Meanwhile, should we exclude the Pay-TV segment, the YTD July total gross adex was only up by 1.2% (vs. our 2.1% estimate for the full-year) to RM4.7b. On a MoM basis, the total gross adex grew by 0.6% (vs. 3.5% in June), thanks to the higher contribution from both  Newspaper and Radio segments but largely offset by the lower TV segment contribution.  On market share, Pay-TV continued to grow its share to 34.8% (vs. 23.9% a year ago) at the expense of the newspaper (34.4% vs. 40.2%), FTA TV (23.9% vs. 27.2% previously) and radio segments (3.6% vs. 4.0%). 

Advertisers continue to spend on TV segment, thus boosting the Pay-TV and FTA-TV segments grew by 72.2% YoY (to RM2.5b) and 3.9% YoY (to RM1.7b), respectively, during the first seven months of this year. On MoM basis, both FTA and Pay-TV adex contracted by 6.5% and 5.1%, respectively, as a result of lower Chinese advertisements spending by advertisers. The key lagging channels in July’s FTA segment were 8TV (-16% MoM) and NTV 7 (-24% MoM) while the weak adex performance in Wai Lai Toi (-12% MoM) was the main factor of the lower Pay-TV adex. Astro PRIMA, Astro RIA and Astro Wah Lai Toi channels continued to rank as the top three highest Pay-TV adex generators with an aggregate contribution of RM814m in gross adex or 32% of the total YTD Pay-TV gross adex. 

Newspaper YTD July gross adex rose marginally by 1.1% YoY to RM2.5b, thanks to the higher adex growth in the Chinese (8.2% YoY) segment but largely offset by the weaker performance in both the English (-0.2% YoY) as well as BM (-1.1% YoY) segments. We believe the continued weaker adex momentum in the English newspaper segment, to a certain extent, is due to the change in readers’ reading behaviour from the traditional hard copy to digital format. On a MoM comparison, all language's newspapers adex recorded positive growth, mainly driven by the various pre-festival marketing campaigns. On the newspaper incumbents, MEDIA’s July newspaper gross  adex recorded the highest YoY growth of 9.5% (or 25.4% MoM to RM156m), followed by STAR (2.2% YoY; 4.8% MoM to RM84m) and MEDIAC (2.2% YoY; 3.3% MoM to RM73m).  

Radio segment continues to gain traction in YTD July and grew by 6.7% YoY to RM261m. On a MoM basis, the segment July’s adex advanced by 16.3% to RM44m at the expense of other media types, i.e. Magazines (-1.5% MoM); Outdoor (-1.8% MoM); in-store (-0.8% MoM) and cinema (-40.2% MoM).

Source: Kenanga