9MCY22 total adex grew 12.3% YoY, slightly above our expectation as momentum from the reopening of the economy continued into 3QCY22. The digital, radio and newspaper segments were the main growth drivers as radio continued to rebound strongly with the lifting of pandemic restrictions while the digital segment maintained resilient growth. Newspaper adex came in above our expectation due to stronger revised 1HCY22 numbers and sustained growth from the medium. Overall, we revise our full-year target adex growth upwards to 11.8% from 10.9% as we account for stronger contributions from the newspaper segment. 4QCY22 is expected to be a bumper season with the World Cup coinciding with the holiday season. However, we remain NEUTRAL on the segment given a softer CY23 outlook.

9MCY22 adex sustained momentum. YoY, total adex grew 12.3%, slightly above our expectation of 10.9% for the full-year. In terms of performance by major channels, free-to-air (FTA) TV remained flat YoY, contracting marginally by 0.2%. Despite the Commonwealth Games and Merdeka celebrations taking place in 3QCY22, FTA TV adex growth tapered off slightly as the Tokyo Olympics took place during the same period last year. Elsewhere, the digital segment continued growing resiliently, increasing 41.3% YoY as advertisers continued to gravitate towards the platform. Radio adex sustained the up-trend, growing 29.8% YoY as the segment continued to benefit from lifted pandemic restrictions and increased drivers on the roads. Newspaper adex came in above expectation as the segment grew 18.3%. Revised 1HCY22 adex saw the segment growing much more than initially reported (revised: 8.8% vs. initial: 2.9%) and we believe the segment benefitted similarly to radio from the lifting of pandemic restrictions.

QoQ. Total adex grew 4.9%, driven mainly by a 6.3% increase in FTA TV adex. We believe this was due to the Commonwealth Games which drew in advertisers as well the resumed broadcast of the Merdeka celebrations for the first time since the pandemic. Additionally, advertising spending in 2QCY22 may have been bumped up by Hari Raya Aidilfitri celebrations. Historically, the sector generally saw a downtick in spending immediately after the Hari Raya season as advertisers wind down advertising budgets post the festivities. Digital media and newspapers also grew in-line with total adex at 4.9% and 3.3%, respectively, but FTA TV remained the largest growth driver.

Segment market breakdown. Overall, FTA TV remained the largest segment, commanding 53.8% of total adex followed by digital (20.9%), newspaper (16.1%) and radio (6.6%). However, FTA TV saw the largest fall in market share as it decreased compared to 60.5% last year. A majority of this market share was claimed by digital media which grew 4.2ppt from 16.7% during 9MCY21. This is in-line with the structural migration to digital advertising that offers improved demographic targeting. Elsewhere, newspaper and radio both grew slightly from 15.3% and 5.7% of total adex, respectively, during 9MCY21. The two media channels benefitted greatly from the reopening of the economy, resulting in them clawing back some market share lost during the pandemic.

Post review. Overall, we have increased our full-year adex growth forecast to 11.8% from 10.9%. We expect growth to taper off given that adex begun to rebound in 4QCY21. We maintain our growth expectations for FTA TV, radio and digital at 1%, 20% and 45%, respectively. However, we increase our newspaper growth expectation from 2% to 10% to reflect the stronger revised 1HCY22 and performance so far.There is no change to our forecasts for print media companies under our coverage, i.e. MEDIA (OP; TP: RM0.64), MEDIAC (MP; TP: RM0.90) and STAR (MP; TP: RM0.335) as the revised numbers are actually in-line with the most recent round of results, having been pre-empted by prior adjustments. 4QCY22 is expected to be seasonally strong as the World Cup and holiday season coinciding should boost an increase in overall adex. However, CY23 seems mixed for the sector given the overall softer economic growth outlook and the lack of major sporting events.

We maintain NEUTRAL on the sector. We continue to like MEDIA given: (i) its integrated approach to advertising via Omnia which we believe offers better demographic targeting and scalability, (ii) its effective cost consolidation efforts which we expect to continue, and (iii) its prime position to capitalise on adex growth across multiple platforms given its performance thus far.

Source: Kenanga Research - 19 Oct 2022