We reiterated our NEUTRAL view on the media sector. August total gross adex dipped 7.8% MoM, marking the first month-on-month decline since February this year. The MoM dip, we believe, was mainly due to: (i) shortened working days as a result of the Hari Raya festival, and (ii) Fitch’s downgrade of Malaysia’s sovereign credit rating outlook which affected business and consumer sentiment. On a YTD August basis, the total gross adex grew by 17.4% YoY to RM8.4b (vs. our 17.5% YoY estimate for the full-year), led by higher contributions from the Pay-TV, FTA-TV and newspaper segments. However, should we strip off the PayTV contribution, the YTD August total gross adex only reported a flattish yearly growth to RM5.4b. Going forward, we believe the adex momentum in the remaining months of this year will continue to face challenges in view of the spillover effect from the recent petrol price hike coupled with the government subsidies rationalisation plan (thus dampening consumer sentiment). This is despite the fact that the 4Q of each calendar year normally records the highest adex. There are no changes to our media companies’ CY13-CY14 earnings forecasts. We are reiterating our MARKET PERFORM calls on Astro Malaysia Holdings (“ASTRO”, TP: RM3.14); Media Chinese International (“MEDIAC”, TP: RM1.19), and Media Prima (“MEDIA”, TP: RM2.60). Our UNDERPERFORM rating on Star Publications (“STAR”, TP: RM2.41) remains unchanged.

YTD August gross adex stood at RM8.4b (17.4% YoY), mainly fuelled by the strong TV segment adex contribution (34.4% YoY to RM4.9m). On closer analysis, the TV segment was boosted by the strong Pay-TV adex, which surged by 73.0% YoY (to RM2.9b), in contrast to the miniscule 0.8% YoY growth in the FTA-TV segment. The stronger YTD Pay-TV segment was driven by 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 23.4% YoY to RM2.1b as of YTD August. Meanwhile, should we exclude the Pay-TV segment; the YTD August total gross adex growth was flat YoY (vs. our 2.1% estimate for the full-year) to RM5.4b. On a MoM basis, the total gross adex dipped by 7.8% (vs. 1.0% growth in July), no thanks to the shortened working days as a result of the long Hari Raya break coupled with Fitch's downgrade of Malaysia’s sovereign credit rating outlook which dampened business and consumer sentiment. All the advert mediums recorded high single digit to low double digit monthly drop with the exception of the Outdoor segment which grew by 6.5% MoM to RM11.1m.

Advertisers resumed cautious in August on the TV segment … thus causing both the FTA and Pay-TV segments to contract by 11.7% and 5.9% on a MoM basis. The key lagging channels in Augusts’ FTA segment were TV3 (-13% MoM) and TV 9 (-16% MoM) while the weak adex performance in Astro Ria (-7% MoM) was the main reason for 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 RM958m in gross   adex or 33% of the total YTD Pay-TV gross adex.

….as well as in the newspaper segment. On a MoM comparison, BM newspapers adex recorded the largest dip of 16% since March 13 as a result of shorter working days. Chinese newspapers adex, meanwhile contracted by 4.8% MoM while English adex improved marginally by 0.8% MoM. On a YTD August basis, newspaper gross adex rose marginally by 0.8% YoY to RM2.9b, thanks to the higher adex growth in the Chinese (7.0% YoY) and English (1.2% YoY) segments but largely offset by the weaker performance in the BM (-3.0% YoY) segments. On the newspaper incumbents, STAR’s August newspaper gross adex recorded the highest YoY growth of 9.9% (or -2.2% MoM to RM82m), followed by MEDIAC (0.6% YoY; -3.9% MoM to RM70m) and MEDIA (-4.1% YoY; -9.7% MoM to RM141m).

Outdoor (+6.5% MoM) gained traction in August at the expense of other media types, i.e. Magazines (-7.2% MoM); Radio (-12.4% MoM); in-store (-3.0% MoM) and cinema (-8.6% MoM). We believe the better outdoor adex performance in August was mainly boosted by the long holiday break thus leading to higher traffic volume and outdoor viewership.

Source: Kenanga