Although  advertising  expenditure  (adex)  growth  for  July  moderated  on a m-o-m basis, YTD adex was still up 2%.  Media Prima (MPR; BUY, FV: MYR3.60)  remains  our  top  pick  as  adex  at  its  core  businesses continued  to  outperform  the  industry.  We  maintain  OVERWEIGHT  on the  sector  as  we  believe  adex  should  strengthen  come  year-end.  No changes  to  our  forecasts  for  the  companies  under  our  coverage, pending the release of their upcoming quarterly results. 
 
- Is overall adex growth slowing down? Malaysia’s total gross adex for July rose by a marginal 0.6% m-o-m and 16.7% y-o-y. Stripping out the pay-TV  contribution,  monthly  adex  grew  4.2%  m-o-m  and  -2.1%  y-o-y. We  believe  the  slowdown  in  adex  growth  was  mainly  attributed  to  the high base of election spending in the previous quarter  as well as a slow pick-up  in  corporate  advertising.  The  1.9%  y-o-y  YTD  adex  growth  in 7MCY13  is  nonetheless  still  respectable  vs  the  1.0%  y-o-y  decline  in 7MCY12 (excluding pay-TV). We believe the media sector is still poised for  a  recovery  with  stronger  adex  growth  anticipated  towards  the  year-end.

- MPR outperforms the industry. Media Prima (MPR) –  our top pick for the sector – saw its core businesses’ adex outperforming the industry  on a  YTD  basis. Notably, the group’s:   i)  free-to-air  (FTA)  TV  adex  grew 7.1% y-o-y vs industry’s 3.9%, ii) print media adex ticked up 2.2% y-o-y vs  industry’s  1.1%,  and iii) radio adex expanded 16.3% vs industry’s 6.7%. As such, we are keeping MPR as our top pick in the industry.

- Risks. Risks to our call include: (i) the recovery of adex  may not be as strong  as  anticipated,  and  (ii)  concerns  over  the  imposition  of  the  GST which may affect advertisers’ spending propensity.

- Maintain OVERWEIGHT. While July figures may not seem encouraging, we remain positive that overall adex would recover in CY13. We are still OVERWEIGHT on the sector as YTD adex has improved and we expect a  stronger  improvement  by  year-end.  We  keep  our  recommendations and forecasts for the media companies under our coverage  pending the release of their quarterly results.     

Source: RHB