Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD
Research House: MAYBANK
Media sector
Maintain overweight: Media earnings surprised on the upside during the 4Q10 results season on strong advertising expenditure growth. January industry gross adex growth remained encouraging at 14% year-on-year (y-o-y), led by TV, as consumer sentiment remained robust at a 3'' year high. We expect seasonal weakness in February but still a likely high single to low double-digit growth in percentage terms y-o-y. Media Prima's recent share price weakness is an opportunity to accumulate and MCIL is a value proposition at single-digit valuations.
Media and gaming were the only sectors that surprised on the upside in the recent 4Q10 results season. Combined recurring net profit in 4Q10 was RM169.7 million (+19% y-o-y, +23% quarter-on-quarter). Media Prima results were in line, but we had imputed very conservative adex growth assumptions for the print media: Star and MCIL. In the end, both recorded strong mid-double-digit percentage rises in adex growth.
Y-o-y growth was led by TV (18%), while newspapers did not fare too poorly (12%). As a result, TV gained one percentage point of gross adex share y-o-y at the expense of newspapers. Most of the top 10 advertisers spent more y-o-y on advertisements. Month-on-month (m-o-m), January's total gross adex was 22% lower, but within the historical range of 20% to 22% contraction. This is because advertisers exhausted their A&P budgets in December, took a breather in January, negotiated rates in February and gradually increased ad spend from March onwards as adex-friendly events and festivals come to pass.
We understand that February's total gross adex will be lower m-o-m but higher y-o-y by high single to low double digits in percentage terms. Advertisers seek to capitalise on still strong consumer sentiment. According to the MIER, consumer sentiment is at a 3'' year high. We maintain our 5% total gross adex growth forecast for 2011, conservatively premised on one times real GDP growth (12-year average: 2.3 times). That said, we see some publications (The Star and New Straits Times) recording lower adex growth on waning daily circulation.
Media Prima is trading at a significant four times price-earnings ratio (PER) discount to its historical mean of 17 times despite TV adex still growing strongly. MCIL is attractive for its single-digit valuations and high dividend yields. MCIL is a 'value buy' at 9.2 times 2011 PER, 31% discount to its peers (average: 13 times) and with an earnings base that is closing in on The Star (just 7% behind). The Star ('hold') offers high net dividend yields, but in light of declining daily circulation, valuations do not yield a compelling 'buy' call. ' Maybank IB Research, March 9
This article appeared in The Edge Financial Daily, March 10, 2011.
Company Name: STAR PUBLICATIONS (M) BHD
Research House: MAYBANK
Media sector
Maintain overweight: Media earnings surprised on the upside during the 4Q10 results season on strong advertising expenditure growth. January industry gross adex growth remained encouraging at 14% year-on-year (y-o-y), led by TV, as consumer sentiment remained robust at a 3'' year high. We expect seasonal weakness in February but still a likely high single to low double-digit growth in percentage terms y-o-y. Media Prima's recent share price weakness is an opportunity to accumulate and MCIL is a value proposition at single-digit valuations.
Media and gaming were the only sectors that surprised on the upside in the recent 4Q10 results season. Combined recurring net profit in 4Q10 was RM169.7 million (+19% y-o-y, +23% quarter-on-quarter). Media Prima results were in line, but we had imputed very conservative adex growth assumptions for the print media: Star and MCIL. In the end, both recorded strong mid-double-digit percentage rises in adex growth.
Y-o-y growth was led by TV (18%), while newspapers did not fare too poorly (12%). As a result, TV gained one percentage point of gross adex share y-o-y at the expense of newspapers. Most of the top 10 advertisers spent more y-o-y on advertisements. Month-on-month (m-o-m), January's total gross adex was 22% lower, but within the historical range of 20% to 22% contraction. This is because advertisers exhausted their A&P budgets in December, took a breather in January, negotiated rates in February and gradually increased ad spend from March onwards as adex-friendly events and festivals come to pass.
We understand that February's total gross adex will be lower m-o-m but higher y-o-y by high single to low double digits in percentage terms. Advertisers seek to capitalise on still strong consumer sentiment. According to the MIER, consumer sentiment is at a 3'' year high. We maintain our 5% total gross adex growth forecast for 2011, conservatively premised on one times real GDP growth (12-year average: 2.3 times). That said, we see some publications (The Star and New Straits Times) recording lower adex growth on waning daily circulation.
Media Prima is trading at a significant four times price-earnings ratio (PER) discount to its historical mean of 17 times despite TV adex still growing strongly. MCIL is attractive for its single-digit valuations and high dividend yields. MCIL is a 'value buy' at 9.2 times 2011 PER, 31% discount to its peers (average: 13 times) and with an earnings base that is closing in on The Star (just 7% behind). The Star ('hold') offers high net dividend yields, but in light of declining daily circulation, valuations do not yield a compelling 'buy' call. ' Maybank IB Research, March 9
This article appeared in The Edge Financial Daily, March 10, 2011.
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