Malaysia’s adex continued  to  chart positive  growth in  1HCY13  (+18.9% y-o-y)  and  we  believe  the  trend  could  continue  with  possibly  stronger growth  in  2H.  Pay TV’s adex grew  stronger  than  that  of  FTA  TV,  while print  media’s adex continued  to  be  depressed.  Maintain  OVERWEIGHT on the sector with MPR as our top pick. We reiterate BUY on Astro and CHM, while keeping our NEUTRAL stance on MCIL. 

- Adex  uptrend  continues.  1HCY13  advertisement  expenditure  (adex) grew by 18.9% y-o-y. Monthly growth in June was rather flattish at 3.5% m-o-m,  mainly  due  to  a  higher  base  in  May  fuelled  by  higher  election-related adex. Nonetheless, the overall growth trend remained intact, with 2QCY13  adex  rising  by  18.1%  y-o-y  and  22.9%  q-o-q.  Moving  forward, we  expect  adex  to  grow  stronger  in  2H  backed  by:  (i)  the  removal  of general  election  uncertainty,  (ii)  2H  is  a  seasonally  stronger  period  for adex  due  to  various  festive  seasons  and  year-end  sales,  and  (iii) advertisers need to exhaust their budgets before the New Year.      

- Adex trends remain the same. 1HCY13 gross adex showed the similar growth trend, with TV segments’ adex growing strongly at the expense of print media’s, while  Pay-TV’s adex growth outperformed  that  of  FTA (free-to-air)  TV.  In  terms  of  newspapers,  Chinese  medium  newspapers continued  to  outperform  other  languages,  with  Media  Chinese International  Limited  (MCIL)’s adex rising  by  9.1%  y-o-y.  Media  Prima (MPR)’s newspapers’ adex inched up 0.5% y-o-y, mainly lifted by News Straits Time (+1.0%) and Metro Harian (+2.1%), but was offset by Berita Harian (-3.7%). 

- Maintain  OVERWEIGHT.  We  are  maintaining  our  stance  that  adex would  recover  at  a  faster  pace  in  the  second  half  of  the  year,  which should  lead  to  a  stronger  adex  recovery  in  2013.  MPR  (FV:  MYR3.60) remains our top pick in the sector, as its fully-integrated business model would  possibly  enable it  to  ride  on  the  recovery  trend.  Furthermore,  we believe  the  company  is  expanding  in  the  right  direction  to  differentiate itself  from  the  peers.  We  have  BUY  calls  on  Astro  (FV:  MYR3.36)  and Catcha  Media  (CHM,  FV:  MYR0.92),  while  maintaining  our  NEUTRAL recommendation on MCIL (FV MYR1.31).

Source: RHB