2QCY21 total gross adex gathered by Nielsen depicted a growth of 6% QoQ and 20% YTD. With the continuous closure of the entertainment sector, the cinema segment’s adex was severely hit, plunging by 83% YTD. On the other hand, FTA television rose by 55% YTD to RM1.6b and gained a higher market share in the adex industry; up by 13.3ppt to 60% YTD of gross total adex and +8.2ppt YoY (Figure 5 - Appendix). Interestingly, we note that the digital segment dropped by 8% YTD which was mainly dragged by 2QCY21 as the segment fell 12% QoQ. With that said, this illustrates that traditional platforms like television are still a relevant platform for advertisers to market to consumers. As the television adex continues rising, we see MEDIA to benefit the most as the group controls the lion’s share of about 75% in this segment. We maintain NEUTRAL on the sector with ASTRO (TP: RM1.20) and MEDIA (TP: RM0.690) as our top picks due to Astro’s attractive dividend yield of 7.2% and its recent successful partnerships with top OTTs, and MEDIA’s recent earnings turnaround.

1HCY21 better than 1HCY20. According to Nielsen’s 6MCY21 statistics, the total gross adex rose by 20% from RM2.3b in 6MCY20 to RM2.8b in 6MCY21 thanks to 2QCY21 adex (+52% up from 2QCY20) boosting first half adex. The continuous movement control and lockdowns in Malaysia have accelerated the growth in FTA adex (+75% YoY or +55% YTD) and radex (+148% YoY and +33% YTD). Interestingly, after stripping off digital adex, the media industry would have seen a rise of 28% (+7.8ppt than with digital adex) in 1HCY21, propelled by the abovementioned FTA segment. Unfortunately, the cinema and magazines segments were severely affected due to the pandemic due to a highly restrictive operating environment for the cinemas which fell by 83% and magazines by 44%.

QoQ, 2QCY21 total gross adex was affected by 12% and 76% drop in digital and in-store platforms, respectively, only grew by 6%. As digital holds the third largest weightage in the industry, a slight drop in digital adex can significantly affect the gross adex (ex-digital: + 9%). The drop in the in-store segment could be due to fewer patrons at stores on account of stricter SOPs in force, resulting in advertisers limiting their marketing spend on this segment. On the other hand, the remaining segments saw positive growth, namely, FTA TV (+14%), magazines (+24%) and radio (+22%) of which FTA TV holds the largest share of 62% in the adex industry which rose by 5.7% from 1QCY21 indicating that traditional platforms are still relevant for advertisers to market to consumers.

Outlook. As the movement control sweeps into 3QCY21 with cases still sky-high, this may continue the upward trajectory of television adex. Not forgetting the long-awaited broadcasting of the delayed Tokyo Olympics 2020 which could be a muchneeded booster in this quarter. As a result, this will benefit MEDIA the most as the group commands the lion’s share of FTA television adex at approximately 75%. Following the rebranding of NTV7 to Didik TV following a collaboration with the Ministry of Education, the adex for this channel jumped by 56% to RM73.0m resulting in 2QCY21 registering the highest adspend since 1QCY19. This indicates that this new collaboration has borne fruit for the group and most likely spurred higher viewership for this channel.

Maintain NEUTRAL on the Media Sector. As the government plans to continue with the Phase 1 of FMCO indefinitely until cases fall below 4,000, we believe this may drag down adex and thus, negatively impact the media sector. However, with the government working on ramping up efforts to achieve herd immunity by December 2021 by setting up more vaccination centres, involving private hospitals and clinics in the vaccination programme, we believe that 4QCY21 onwards will offer a better outlook for the media players. ASTRO (MP, TP: RM1.20) offers attractive dividend yield of 7.2% and its successful partnerships with top OTT platforms such as Disney+ Hotstar and Netflix will help to bump up the group’s subscriber base. That said, we remain cautious of the content cost owing to global sporting events like Tokyo Olympics 2020 and Euro 2020. MEDIA (MP, TP: RM0.690) could be a decent pick for those who need to stay invested in media for (i) recent turnaround in its earnings and (ii) being able to maintain profitability for three quarters consecutively thanks to operating expenses control measures.

Source: Kenanga Research - 26 Jul 2021