Stock Name: MEDIA
Company Name: MEDIA PRIMA BHD
Media
Downgrade to neutral from overweight: While May 2011 total gross advertising expenditure was up 10% year-on-year (y-o-y), it was below expectations as it was only up 4% month-on-month when we expected it to be 10% to 15% higher m-o-m. This was likely due to weakening consumer sentiment due to inflation which will only be aggravated by the recent 7% electricity tariff hike. Furthermore, total gross adex growth y-o-y will decelerate in 2H11 due to the high base effect of 2H10. Only Media Prima remains a 'buy'.
May 2011 total gross adex was up 10% y-o-y due to the relatively stronger economy and advertisers, especially government institutions, fast food chains and hypermarkets, ramping up ad spend ahead of Hari Raya Aidilfitri in August. TV, newspapers and radio all grew 10% y-o-y. Outdoor continued its losing streak for the fourth month in a row sliding 7% y-o-y.
Of the four major mediums, TV led growth expanding 9% m-o-m. Total gross adex for 5M11 grew 13% y-o-y, led by newspapers (+14% y-o-y) followed by TV (+13% y-o-y).
Total gross adex for June 2011 will be flattish m-o-m. Historically, June total gross adex is 0% to 6% higher m-o-m as advertisers pause before adex-friendly festivities in 3Q. That said, we gather that the 7% electricity tariff hike effective June 1 will have a negative impact on adex sentiment despite early indications to the contrary.
The second half of 2011 is looking precarious. We maintain our 8.3% total gross adex growth forecast for 2011 based on 1.5 times real GDP growth expectation of 5.5% (1998 to 2010: 2.3 times). In our view, y-o-y total gross adex growth will decelerate in 2H11 due to the high base effect of 2H10 and weakening consumer sentiment due to the recent subsidy cuts.
With the three media companies under our coverage trading close to their long-term averages, we are now 'neutral' on the media sector. We have only one 'buy' call and that is on Media Prima. We roll forward valuations pegging the stock at 15 times 2012 price-earnings ratio (PER) which derives a RM3.25 target price (previously RM3.06). Only Media Prima has the chance to outperform should a general election be called, as elections have historically favoured TV and Malay newspaper adex.
We retain our 'hold' calls on Star Publications (M) Bhd and Media Chinese International Ltd (MCIL). Our target prices imply 12.6 times 2012 PER for Star and 13.2 times for MCIL. We think these are fair valuations considering slower adex growth momentum for single digit earnings growth over the near term. ' Maybank IB Research, June 22
This article appeared in The Edge Financial Daily, June 23, 2011.
Company Name: MEDIA PRIMA BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 3.25 |
Media
Downgrade to neutral from overweight: While May 2011 total gross advertising expenditure was up 10% year-on-year (y-o-y), it was below expectations as it was only up 4% month-on-month when we expected it to be 10% to 15% higher m-o-m. This was likely due to weakening consumer sentiment due to inflation which will only be aggravated by the recent 7% electricity tariff hike. Furthermore, total gross adex growth y-o-y will decelerate in 2H11 due to the high base effect of 2H10. Only Media Prima remains a 'buy'.
May 2011 total gross adex was up 10% y-o-y due to the relatively stronger economy and advertisers, especially government institutions, fast food chains and hypermarkets, ramping up ad spend ahead of Hari Raya Aidilfitri in August. TV, newspapers and radio all grew 10% y-o-y. Outdoor continued its losing streak for the fourth month in a row sliding 7% y-o-y.
Of the four major mediums, TV led growth expanding 9% m-o-m. Total gross adex for 5M11 grew 13% y-o-y, led by newspapers (+14% y-o-y) followed by TV (+13% y-o-y).
Total gross adex for June 2011 will be flattish m-o-m. Historically, June total gross adex is 0% to 6% higher m-o-m as advertisers pause before adex-friendly festivities in 3Q. That said, we gather that the 7% electricity tariff hike effective June 1 will have a negative impact on adex sentiment despite early indications to the contrary.
The second half of 2011 is looking precarious. We maintain our 8.3% total gross adex growth forecast for 2011 based on 1.5 times real GDP growth expectation of 5.5% (1998 to 2010: 2.3 times). In our view, y-o-y total gross adex growth will decelerate in 2H11 due to the high base effect of 2H10 and weakening consumer sentiment due to the recent subsidy cuts.
With the three media companies under our coverage trading close to their long-term averages, we are now 'neutral' on the media sector. We have only one 'buy' call and that is on Media Prima. We roll forward valuations pegging the stock at 15 times 2012 price-earnings ratio (PER) which derives a RM3.25 target price (previously RM3.06). Only Media Prima has the chance to outperform should a general election be called, as elections have historically favoured TV and Malay newspaper adex.
We retain our 'hold' calls on Star Publications (M) Bhd and Media Chinese International Ltd (MCIL). Our target prices imply 12.6 times 2012 PER for Star and 13.2 times for MCIL. We think these are fair valuations considering slower adex growth momentum for single digit earnings growth over the near term. ' Maybank IB Research, June 22
This article appeared in The Edge Financial Daily, June 23, 2011.
No comments:
Post a Comment