Malaysia’  gross  advertising  expenditure  (adex)  rose  2.5%  m-o-m  and 15.7%  y-o-y  in  November  and  20.2%  y-o-y  in  11MCY13.  We  believe December  adex  may  be  stronger  while  2014  could  be  an  eventful  and positive  year  for  the  media  sector.  MPR  is  our  Top  Pick.  The  recent selldown  may  open  up  a  window  of  opportunity  to  accumulate  media stocks. Maintain OVERWEIGHT on the sector.

• Positive  trend  continues.  November  adex  continued  to  chart  positive growth, perking up 2.5%  m-o-m and 15.7% y-o-y, and was 20.2% higher YTD,  while adex excluding pay-TV contribution exhibited a  similar trend (m-o-m:  +2.9%,  y-o-y:  +4.4%,  YTD:  +3.2%),  in  line  with  expectations. Most  of  the  major  media  recorded  positive  adex  growth  during November,  with free-to-air (FTA) TV chalking up  stronger  m-o-m  growth compared with pay-TV (FTA TV: 2.9% vs pay-TV: 2.0%).
• Dec  adex  to  get  seasonal  boost.  We  expect  gross  adex  to  show stronger  growth  in  December,  which  is  seasonally  the  year’s strongest month. Historical data shows that December adex usually makes up 9.7-10.3%  of  the  entire  year’s  adex,  and  is  usually  12-16%  higher  against November  (except  in  2012  when  it  rose  7.3%  m-o-m).  As  such,  we believe  that  2013  adex  (ex  pay-TV)  could  expand  by  3.5%  versus  the mere 2.0% uptick in 2012.
• 2014 an eventful year.  Going into  2014, we believe adex  growth may strengthen given: i)  a stronger expected real GDP growth of 5.4%, ii) the major  upcoming  sporting  events  such  as  the  World  Cup  and  Asian Games  (adex surged  15.7% y-o-y in 2010-  a World Cup year), and iii) most  of  the  uncertainties  (elections,  implementation  of  Goods  and Services Tax  etc)  clouding the sector  in 2013  would have subsided and this may prompt advertisers to spend more.
• MPR  gets  more  appealing.  Media  Prima  (MPR)’s  shares  have  been heavily sold down in the past two weeks due to what we think was selling pressure  from  Islamic  funds  after  the  stock  was  dropped  from  the Securities  Commission’s  list  of  shariah-compliant  companies.  At  the current  price,  we  find  MPR’s  FY13F  dividend  yield  of  5.2%  quite attractive. This is  based on our 66% dividend payout assumption,  which is in line with  the company’s  historical payout. We believe that the stock is  a  plus  to  own,  especially  given  its  decent  dividend  yield  and  the consistent improvement in its earnings and balance sheet.
• Maintain  OVERWEIGHT.  We  maintain  our  OVERWEIGHT  call  on Malaysia’s  media sector,  with MPR remaining  as our Top Pick. We see the  recent  heavy  selldown  on  MPR  shares  as  an  opportunity  to accumulate the stock at lower price levels.

Adex Highlights

• Overall adex growth  continued  to be positive, with  FTA  TV’s  growth  in  November  mainly driven by MPR’s channels
• Newspapers  charted  positive  growth  in  the month of November.
• MPR’s  papers  outperformed  its  peers  in November
• MPR’s channels continue to dominate FTA TV adex, commanding an 88% market share
• The  positive  trend  is  expected  to  continue  in December,  which  is  usually  the  strongest month for adex.
• MPR’s  New  Straits  Times  chalked  up  growth of 23.7% y-o-y in 11MCY13.
• MPR’s  papers’  growth  rates  have outperformed the industry
• YTD,  adex  growth  in  FTA  TV  was  flattish,mainly dragged down by TV1 and TV2.

Source: RHB