Media

Continued Momentum in 2QCY22

We maintain our media sector’s call at OVERWEIGHT. Adex in 4QCY21 grew by 27% QoQ thanks to the reopening of the economy which prompted advertisers to resume their marketing activities. Thanks to that, 4QCY22 reporting season came in mainly above expectations as the jump in adex played to the favour of the media players. We believe the positive momentum is likely to continue in 2QCY22 as the nation transitions into the endemic stage as precedent shows that the reopening of the economy normally bumps up adex. Media players like MEDIA and ASTRO would most likely benefit as MEDIA’s Omnia segment provides a convenient platform to advertise across all media platforms whereas ASTRO’s newly launched Addressable Advertising solutions allows advertisers to specifically target their audience. All in, we maintain ASTRO (OP, TP: RM1.29) and MEDIA (OP, TP: RM0.740) as our top picks. We like ASTRO for its attractive dividend yield of 8.3%, and taking progressive steps in fulfilling its ambition to be the country’s top OTT aggregator, and an ISP as well. As for MEDIA, it is due to improved margins and robust Omnia segment.

4QCY22 reporting season came in mainly above expectations. Thanks to the reopening of the economy in 4QCY21, media players like MEDIA and MEDIAC saw QoQ jump in advertising revenue – MEDIA’s Omnia segment grew by 40% QoQ whereas MEDIAC’s Malaysian market jumped by 28% QoQ – that resulted in core PATAMI of MEDIA soaring by 279% QoQ whereas MEDIAC’s core PATAMI increased by 20% QoQ. As for STAR, we attribute the higher QoQ core net profit (+467%) to improved core PATAMI margin (+29% in 4QFY21 vs. -9% in 3QFY21) thanks to cost rationalisation exercises carried out in 2HFY20. Lastly, ASTRO came within expectations thanks to a 55% jump in total adex QoQ due to the reopening of the economy.

Positive momentum to continue. Based on the total gross adex gathered by Nielsen for 4QCY21, it shows CY21 total gross adex jumping by 18% thanks to a 39% climb in FTA-TV adex. QoQ, total adex grew by 27% due to the reopening of the economy in the said quarter. We expect a YoY adex growth in 1QCY22 as 1QCY21 began with stringent lockdowns as opposed to no lockdowns implemented in 1QCY22. However, QoQ adex growth trend may see a slight drop as 1Q is seasonally a weak quarter presumably due to advertisers having yet to set out their advertisement campaigns for the year.

Transitioning into the endemic phase. Effective 2QCY22, Malaysia will begin transitioning into the endemic phase which will allow businesses to return to normalcy and international borders to reopen. Basing on the sharp adex rebound shown in 4QCY21, thanks to the relaxation of SOPs and lockdowns in the said quarter, we expect the endemic phase to result in more advertisements being generated as advertisers increase their marketing budget in anticipation of better sales turnover due to the reopening of the economy. We reckon this will greatly benefit media players such as MEDIA due to the group’s integrated marketing approach which makes it convenient for businesses to advertise on multiple platforms via a single channel and Astro as the group's newly launched Addressable Advertising solutions should garner good take-up rate which will see an improvement in the TV adex segment that is currently on a downtrend.

Sector’s call is maintained at OVERWEIGHT. We expect a better adex outlook in CY22 as businesses return to operating at optimal levels coupled with the strong domestic demand which would encourage more advertising activities. All in, we continue to like ASTRO (OP, TP: RM1.07) for its attractive dividend yield of 8.3% and staying on track with of becoming an OTT aggregator of 15 SVODs and ISP by FY23 and MEDIA (OP, TP: RM0.740) for its fully-integrated media platforms and improved margins thanks to the recent cost optimisation exercises.

Source: Kenanga Research - 4 Apr 2022