We reiterate our NEUTRAL view on the media sector. The October total gross adex grew 6.0% MoM mainly fuelled by: (i) the better consumer sentiment after the conclusion of Budget 2014, (ii) temporary easing of the external factors, and (iii) the continued aggressive year-end ad spends. On a YTD basis, the total gross adex up to October advanced by 20.3% YoY to RM10.9b, led by higher contributions from the Pay-TV, FTA-TV and newspaper segments. However, should we strip off the Pay-TV contribution, the YTD October total gross adex YoY growth inched up by merely 2.6% (in-line with our full-year forecast of 2.1%) to RM7.0b. Moving forward, while we believe that the consumer sentiment may somewhat be dented by the recent petrol price hike and on-going government subsidies rationalisation plan, the eventful traditionally strong 4Q may cushion the negative impact, if any. We are keeping our media companies’ CY13-CY14 earnings forecasts for now, pending the upcoming 3QCY13 result announcements. At present, we are keeping 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: RM2.64) remains unchanged.

YTD October gross adex advanced to RM10.9b (+20.3% YoY), led by the continued strong TV segment adex contribution (36.0% YoY to RM6.4b). On closer analysis, the TV segment was mainly boosted by the strong Pay-TV adex, which soared 74.6% YoY (to RM3.4b) in contrast to the minuscule 1.6% YoY growth in the FTA-TV segment. To recap, the stronger YTD Pay-TV segment was due mainly to the 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 21.1%

YoY to RM2.5b as of YTD October. Meanwhile, should we exclude the Pay-TV segment; the YTD October total gross adex growth was merely higher by +2.6% YoY (inline with our full-year estimate of 2.1%) to RM7.0b. On a MoM basis, the total gross adex grew by 6.0% (vs. +7.1% in September), mainly fuelled by all the segments as a result of improving consumer sentiment following the announcement of Budget 2014 (which provided more colours as to the country’s economic and business condition) as well as Washington’s last-minute deal to avoid a U.S. default which ended a partial governmental shutdown. Meanwhile, the continued aggressive ad spends by advertisers to fulfil year-end budget also help to improve the monthly spending.

Top three channels continued to dominate the Pay TV ad spend. Astro Ria, Astro Prima and Astro Wah Lai Toi continued to rank the top three highest Pay-TV adex generators with an aggregate contribution of RM1.3b or 33% of the total YTD Pay-TV gross adex. Meanwhile, should we include AXN and Astro AEC into the portfolio; the top five highest Pay-TV adex generators will see their total domination increasing to 45.3% of the total YTD Pay-TV gross adex with an aggregate adex spent of RM1.8b (or +17.1% YoY). On the FTA TV front, TV3 and 8TV continued to rank as the top two highest adex generators while TV9 has replaced NTV7 as the third favourite FTA-TV channels YTD which we believe was mainly due to its higher discount rate. On a MoM basis, both the FTA and Pay-TV segments advanced by 10.9% and 9.2%, respectively, as advertisers continued to rush their adex spending to fulfil year-end budget. MEDIA’s October Pay-TV gross adex improved by +3.7% YoY (or +10.2% MoM) to RM263m.

The newspaper segment eroded 0.7% in October but still record decent growth of 5.1% YTD. On a MoM comparison, both BM and Chinese newspapers’ adex slipped by 0.4% and 4.6%, respectively. The former was mainly dragged by poor adex performance in both Kosmo (-12%) and Utusan Malaysia (-16%) while the latter was mainly dragged by Nanyang (-43%) due to normalisation of base effect after the Chinese Moon Cake festival. English adex, meanwhile, improved by +3.9% MoM as a result of the stronger adex performance in Malay Mail (+27% MoM). On the newspaper incumbents, October newspaper gross adex for MEDIAC, STAR and MEDIA improved by +8.2%; +33.1%; and +27.3% YoY, to RM79.2m; RM102.6m; and RM133.5m, respectively, according to Nielsen.

Source: Kenanga