Media
Maintain underweight: September 2011 total gross advertising expenditure was up 4% year-on-year (y-o-y), but down 17% month-on-month (m-o-m) to a counter-seasonal six-month low. The underperformance was due to weakening consumer sentiment. October is expected to be another quiet month due to a lack of adex-friendly events. The 3Q11 results season may see earnings contractions y-o-y as adex growth will not outpace cost inflation. We maintain underweight on the media sector.
Despite Hari Raya Aidilfitri falling in September last year versus August this year, September 2011 total gross adex was still up 4% y-o-y. Newspaper adex, especially Malay and Chinese newspapers, grew 7% y-o-y while TV only grew 3% y-o-y. Radio adex contracted 7% y-o-y, the first time this year, while outdoor adex snapped its seven-month losing streak, growing 4% y-o-y.
We expected September total gross adex to be down m-o-m due to a lack of adex-friendly events, but we were disturbed that it was the lowest since March 2011. Historically, September total gross adex is seasonally higher than that of March.
Historically, October and November are quiet months due to a lack of adex-friendly events with their total gross adex levels little changed from September. In terms of total gross y-o-y adex growth, 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.
In 3Q11, total gross adex grew 8% y-o-y led by newspaper adex which grew 12% y-o-y while TV grew 4%. Adex revenue of individual media companies will continue growing y-o-y but will not outpace cost inflation at low double digits in percentage terms y-o-y. Therefore, 3Q11 results season may witness earnings contractions y-o-y, especially TV-centric Media Prima Bhd.
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 believe media companies should not be trading at historical averages but at close to -1 standard deviation valuations. Media Prima 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 over 5%. — Maybank IB Research, Nov 10
This article appeared in The Edge Financial Daily, November 11, 2011.
Maintain underweight: September 2011 total gross advertising expenditure was up 4% year-on-year (y-o-y), but down 17% month-on-month (m-o-m) to a counter-seasonal six-month low. The underperformance was due to weakening consumer sentiment. October is expected to be another quiet month due to a lack of adex-friendly events. The 3Q11 results season may see earnings contractions y-o-y as adex growth will not outpace cost inflation. We maintain underweight on the media sector.
Despite Hari Raya Aidilfitri falling in September last year versus August this year, September 2011 total gross adex was still up 4% y-o-y. Newspaper adex, especially Malay and Chinese newspapers, grew 7% y-o-y while TV only grew 3% y-o-y. Radio adex contracted 7% y-o-y, the first time this year, while outdoor adex snapped its seven-month losing streak, growing 4% y-o-y.
We expected September total gross adex to be down m-o-m due to a lack of adex-friendly events, but we were disturbed that it was the lowest since March 2011. Historically, September total gross adex is seasonally higher than that of March.
Historically, October and November are quiet months due to a lack of adex-friendly events with their total gross adex levels little changed from September. In terms of total gross y-o-y adex growth, 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.
In 3Q11, total gross adex grew 8% y-o-y led by newspaper adex which grew 12% y-o-y while TV grew 4%. Adex revenue of individual media companies will continue growing y-o-y but will not outpace cost inflation at low double digits in percentage terms y-o-y. Therefore, 3Q11 results season may witness earnings contractions y-o-y, especially TV-centric Media Prima Bhd.
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 believe media companies should not be trading at historical averages but at close to -1 standard deviation valuations. Media Prima 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 over 5%. — Maybank IB Research, Nov 10
This article appeared in The Edge Financial Daily, November 11, 2011.
