Media sector
Maintain underweight: Total gross advertising expenditure in December 2011 was up only 1% year-on-year (y-o-y), while TV adex contracted 2% y-o-y, the third consecutive month of contraction. With consumer sentiment at a two-year low, total gross adex growth in 2012 will likely be off to a slow start. Maintain “underweight” on the media sector.
Although newspaper adex still grew 6% y-o-y, this was the weakest growth since February 2011. By language, we understand that newspaper adex growth was driven by the Malay and Chinese newspapers, while adex of English newspapers was flattish if not lower y-o-y.
Gross adex growth for 2011 of 8% was within expectations and a tad higher than our forecast of 7%. By segment, however, TV adex growth of 4% was below our expectation of 7% while newspaper adex growth of 12% was above our 5% expectation. The eurozone debt crisis drove European multinationals to migrate more of their ad spend from TV to cheaper mediums such as newspapers in 2H11.
There is a high correlation between consumer sentiment and total y-o-y adex growth. The Malaysian Institute of Economic Research (Mier) Consumer Sentiment Index hit a two-year low of 106.3 in 4Q11 on job security and inflation concerns. With consumers expected to reduce spending going forward, adex growth will be negatively affected.
We maintain our 2012 total gross adex growth forecast of 7% based on two times real GDP growth.
We understand that spot newsprint prices eased from US$700 (RM2,128) per tonne in 3Q11 to US$680 in 4Q11 due to the slowing Chinese economy negatively impacting old newspaper prices, the raw material for newsprint production. That said, it remains to be seen if the slowing Chinese economy will negatively impact the Malaysian economy and hence, adex growth, even further.
As 2011 TV adex growth of 4% was below expectation of 7%, we may have to review our Media Prima Bhd estimates. We reiterate our view that total y-o-y gross adex growth
going forward will be in mid-single digits at best until mid-2012 at the earliest.
Media Prima and Media Chinese International Ltd remain “sells”, while Star Publications (M) Bhd remains a “hold” for its stable dividend yields of more than 5%. — Maybank IB Research, Jan 26
Maintain underweight: Total gross advertising expenditure in December 2011 was up only 1% year-on-year (y-o-y), while TV adex contracted 2% y-o-y, the third consecutive month of contraction. With consumer sentiment at a two-year low, total gross adex growth in 2012 will likely be off to a slow start. Maintain “underweight” on the media sector.
Although newspaper adex still grew 6% y-o-y, this was the weakest growth since February 2011. By language, we understand that newspaper adex growth was driven by the Malay and Chinese newspapers, while adex of English newspapers was flattish if not lower y-o-y.
Gross adex growth for 2011 of 8% was within expectations and a tad higher than our forecast of 7%. By segment, however, TV adex growth of 4% was below our expectation of 7% while newspaper adex growth of 12% was above our 5% expectation. The eurozone debt crisis drove European multinationals to migrate more of their ad spend from TV to cheaper mediums such as newspapers in 2H11.
Media Chinese International Ltd, which owns Sin Chew Daily, remains a 'hold'.
There is a high correlation between consumer sentiment and total y-o-y adex growth. The Malaysian Institute of Economic Research (Mier) Consumer Sentiment Index hit a two-year low of 106.3 in 4Q11 on job security and inflation concerns. With consumers expected to reduce spending going forward, adex growth will be negatively affected.
We maintain our 2012 total gross adex growth forecast of 7% based on two times real GDP growth.
We understand that spot newsprint prices eased from US$700 (RM2,128) per tonne in 3Q11 to US$680 in 4Q11 due to the slowing Chinese economy negatively impacting old newspaper prices, the raw material for newsprint production. That said, it remains to be seen if the slowing Chinese economy will negatively impact the Malaysian economy and hence, adex growth, even further.
As 2011 TV adex growth of 4% was below expectation of 7%, we may have to review our Media Prima Bhd estimates. We reiterate our view that total y-o-y gross adex growth
going forward will be in mid-single digits at best until mid-2012 at the earliest.
Media Prima and Media Chinese International Ltd remain “sells”, while Star Publications (M) Bhd remains a “hold” for its stable dividend yields of more than 5%. — Maybank IB Research, Jan 26
