Company Name: MEDIA PRIMA BHD
Research House: RHB
Maintain overweight: According to Nielsen Media Research (NMR), August's gross ad spend for print and TV media rose 8.7% year-on-year (y-o-y), with print and TV media reporting y-o-y growth of 11.3% and 5.7%, respectively.
For the print media segment, August's adex growth was led by the Malay dailies, where adex grew 22.2% y-o-y led by Berita Harian (+26.5% y-o-y) and Harian Metro (+24.1% y-o-y) largely due to the Hari Raya Aidilfitri celebration. This was followed by the English dailies, where adex grew 7% y-o-y led by NST (+13.4% y-o-y), while the Star recorded a modest adex growth of 2.6% y-o-y. As for the Chinese dailies, adex grew 4.5%, thanks to China Press (+20.1 y-o-y), but was offset by a weaker adex for Nanyang Siang Pau (-13.3% y-o-y).
August's TV growth slowed to 5.7% y-o-y (July: +20.7% y-o-y), the slowest monthly adex growth thus far this year. This was mainly due to slower adex growth for TV3, which only grew 0.7% y-o-y. Collectively, Media Prima Bhd's channels posted y-o-y growth of 4.2% led by 8TV (+15.5% y-o-y).
Although year-to-date, adex growth stands at 20.3%, we expect the growth rate to slow down in 2H10. First, following the strong start to the global economic recovery in 1H10, we believe the economy will likely grow at a more moderate pace in 2H10, although we do not expect the global economy to fall into a double dip recession. Secondly, adex will now be coming from a higher base. Nevertheless, adex growth should continue to remain healthy, supported by sporting events like the Commonwealth Games and the upcoming festive season.
The risks include: (i) weaker-than-expected consumer spending and demand (hence, adex), which could be due to a slower-than-expected recovery in the global economy, among others; (ii) higher-than-expected newsprint/content costs; and (iii) a weaker-than-expected ringgit against the US dollar.
We make no change to our earnings forecasts for now. We reiterate our outperform calls on MCIL Multimedia Sdn Bhd, Media Prima and Star Publications (M) Bhd and maintain our overweight stance on the sector. ' RHB Research Institute Sdn Bhd, Sept 23.
This article appeared in The Edge Financial Daily, September 24, 2010.