Media sector
Maintain underweight: October 2011 total gross advertising expenditure was up 4% year-on-year (y-o-y), but disturbingly, TV adex contracted 6% y-o-y, the largest contraction since February 2009. We understand this is due to weakening consumer sentiment. Newspaper adex, especially Malay and Chinese newspapers, grew 12% y-o-y.
November 2011 is expected to be another quiet month due to lack of adex-friendly events. Maintain “underweight” on the media sector.
Whenever TV adex contracts but newspaper adex grows y-o-y, this indicates that advertisers are turning cautious on consumers. Historically, TV adex is more sensitive to sentiment fluctuations than newspaper adex.
October 2011 total gross adex was little changed from the seasonally slower months of March and April.
Historically, October total gross adex is seasonally higher than that of both March and April. Like September 2011, we understand that this was due to still weak consumer sentiment.
Historically, November is a quiet month due to a lack of adex-friendly events with the total gross adex levels little changed from October. In terms of total gross adex growth y-o-y going forward, we reiterate our view that it will be mid single digits in percentage terms at best due to the high base effect and weakening consumer sentiment. Adex for 10MFY11 grew 10% y-o-y, in line with our 6.8% forecast gain for 2011 and 7% for 2012.
We maintain our assumptions and earnings estimates for the media companies under our coverage. As we expect three-year forward sector earnings compound annual growth rate of only 2%, we opine that media companies should not be trading at historical averages but at close to -1 standard deviation valuations.
Media Prima Bhd is a “sell” for its vulnerability to slower adex growth. Media Chinese International Ltd is a “sell” for its vulnerability to newsprint prices. Star Publications (M) Bhd is a “hold” for its stable dividend yields of more than 5%. — Maybank IB Research, Nov 17
This article appeared in The Edge Financial Daily, November 18, 2011.
Maintain underweight: October 2011 total gross advertising expenditure was up 4% year-on-year (y-o-y), but disturbingly, TV adex contracted 6% y-o-y, the largest contraction since February 2009. We understand this is due to weakening consumer sentiment. Newspaper adex, especially Malay and Chinese newspapers, grew 12% y-o-y.
November 2011 is expected to be another quiet month due to lack of adex-friendly events. Maintain “underweight” on the media sector.
Whenever TV adex contracts but newspaper adex grows y-o-y, this indicates that advertisers are turning cautious on consumers. Historically, TV adex is more sensitive to sentiment fluctuations than newspaper adex.
October 2011 total gross adex was little changed from the seasonally slower months of March and April.
Historically, October total gross adex is seasonally higher than that of both March and April. Like September 2011, we understand that this was due to still weak consumer sentiment.
Historically, November is a quiet month due to a lack of adex-friendly events with the total gross adex levels little changed from October. In terms of total gross adex growth y-o-y going forward, we reiterate our view that it will be mid single digits in percentage terms at best due to the high base effect and weakening consumer sentiment. Adex for 10MFY11 grew 10% y-o-y, in line with our 6.8% forecast gain for 2011 and 7% for 2012.
We maintain our assumptions and earnings estimates for the media companies under our coverage. As we expect three-year forward sector earnings compound annual growth rate of only 2%, we opine that media companies should not be trading at historical averages but at close to -1 standard deviation valuations.
Media Prima Bhd is a “sell” for its vulnerability to slower adex growth. Media Chinese International Ltd is a “sell” for its vulnerability to newsprint prices. Star Publications (M) Bhd is a “hold” for its stable dividend yields of more than 5%. — Maybank IB Research, Nov 17
This article appeared in The Edge Financial Daily, November 18, 2011.
