We reiterate our NEUTRAL view on the media sector. September total gross adex grew 7.1% MoM mainly fuelled by: (i) the beginning of aggressive ad spends for the year-end budget, and (ii) normalisation of base effect after the short working month in August due to the Hari Raya festival. On a YTD basis, the total gross adex up to September advanced by 19.4% YoY to RM9.6b, led by higher contributions from the Pay-TV, FTA-TV and newspaper segments. However, should we strip off the Pay-TV contribution, the YTD September total gross adex YoY growth was flattish at only 1.8% (vs. our 2.1% estimate) to RM6.2b. Going forward, while we are entering the traditionally strong 4Q, the adex momentum in the remaining months may be, to a certain extent, affected by the spill-over effect from the recent petrol price hike and the government subsidies rationalisation plan. 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 Star Publications (STAR, TP: RM2.41). Our UNDERPERFORM rating on Media Prima (MEDIA, TP: RM2.60) remains unchanged.

YTD September gross adex stood at RM9.6b (+19.4% YoY), mainly fuelled by the strong TV segment adex contribution (35.6% YoY to RM5.6b). On closer analysis, the TV segment was boosted by the strong Pay-TV adex, which surged 74.5% YoY (to RM3.4b), in contrast to the minuscule 1.4% YoY growth in the FTA-TV segment. The stronger YTD Pay-TV segment was driven by 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 19.8% YoY to RM2.2b as of YTD September. Meanwhile, should we exclude the Pay-TV segment; the YTD September total gross adex growth was flat at +1.8% YoY (vs. our 2.1% estimate for the full-year) to RM6.2b. On a MoM basis, the total gross adex grew by 7.1% (vs. -7.8% in August) as a result of higher main-stream media contribution as well as the low base in August. The decline in August was mainly due to the shortened working days amid the Hari Raya break coupled with Fitch's downgrade of Malaysia’s sovereign credit rating outlook, which dampened business and consumer sentiment.

Adding TV AlHijrah into FTA portfolio. Nielsen has started to include TV AlHijrah into its FTA segment from September 2013 onwards. Nonetheless, the impact is negligible as TV AlHijrah only contributed 1.7% to the September FTA TV ad spent. On a MoM basis, both the FTA and Pay-TV segments advanced by 12.1% and 9.1%, respectively, as advertisers start their spending rush to fulfil year-end budget. For the Pay TV segment, 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 RM1.1b in gross adex or 33% of the total YTD Pay-TV gross adex. On the FTA TV front, MEDIA’s 3QCY13 gross adex fell by 3.7% QoQ (-4.1% YoY), no thanks to the lower adex contribution from 8TV and NTV7.

The newspaper segment has also benefited from ad spend rush. On a MoM comparison, BM newspaper's adex declined 13% which we reckon was due to normalisation of base effect after the Hari Raya period. Chinese newspapers adex, on the other hand, expanded by 17.6% MoM amid the Chinese Moon Cake festival while English adex also improved by 9.1% MoM. On a YTD September basis, newspaper gross adex rose by 4.3% YoY to RM3.0b, thanks to the higher adex growth in the Chinese (8.0% YoY) and English (7.9% YoY) segments despite the weaker performance in the BM (-1.8% YoY) segments. On the newspaper incumbents, 3QCY13 newspaper gross adex for MEDIA and MEDIAC improved by +7.9% and +6.8% YoY, respectively, while STAR has reversed its previous negative growth trend and grew by 24% YoY (1QFY13: -4.3% YoY; 2QFY13: -9.0% YoY), according to Nielsen.

Source: Kenanga