Stock Name: STAR
Company Name: STAR PUBLICATIONS (M) BHD
Media sector
Maintain underweight
As expected, September's gross advertising expenditure (adex) for TV and print media combined showed a sequential monthly contraction of 18.1%, following the bumper August adex (due to Hari Raya and Merdeka festivities), according to Nielsen Media Research (NMR). On year-on-year (y-o-y) basis, adex growth moderated to 5.1% in Septemebr (August: +9.7% y-o-y).
Print: Bearing in mind the ad rate hike effective January 2011, the print media showed positive y-o-y growth of 7% in September, although it has moderated (August: +14.1% y-o-y). On a month-on-month (m-o-m) basis, the print media contracted 21.2%, surprisingly due to the Malay dailies' 37.5% m-o-m contraction. Prior to September, the Malay dailies' adex growth has been quite strong since February, with a monthly sequential growth of 15.5%, compared with English (8.5%) and Chinese (5.8%) dailies.
Media Chinese International Ltd's (MCIL) newspapers recorded stronger y-o-y numbers across the board, compared with other Chinese dailies. Star Publications (M) Bhd had a relatively decent month as adex grew 1.8% y-o-y (-7.1% m-o-m).
TV: TV adex in September moderated further since July with only 2.9% y-o-y growth (August: +4.4% y-o-y), mainly supported by strong numbers from TV3 and 8TV. Collectively, adex for Media Prima's channels held up quite well with 8.6% y-o-y growth (-12.1% m-o-m). In comparison, TV1 and TV2 combined recorded -27.5% y-o-y growth (-26.5% m-o-m).
For the remainder of 2011, we expect adex growth to moderate further due to lack of festivities or big events and a high base effect in 4Q10. Looking at 2008 elections, a snap election before 2012 will have a positive though not significant impact on the 2011 adex. Also, global economic uncertainties have resulted in advertisers being more prudent on ad spend. Year to date, adex grew 11%. For now, we maintain our projected 2011 adex growth of 9%, and expect adex growth to slow down to 3.6% in 2012.
The risks include: 1) stronger-than-expected consumer spending and demand (and hence, adex), possibly due to a faster-than-expected recovery in the global economy, among others; 2) lower-than-expected newsprint/content costs; and 3) stronger-than-expected ringgit vs the US dollar.
No change to our earnings forecasts. Maintain 'underweight' on the sector. We believe the sector lacks catalysts as adex growth may weaken further if a double-dip global economic recession materialises. Historically, we note that the GDP multiplier effect on adex growth weakens (potentially deteriorating by as much as half) when GDP growth softens. ' RHB Research, Oct 31
This article appeared in The Edge Financial Daily, November 1, 2011.
Company Name: STAR PUBLICATIONS (M) BHD
| Research House: RHB | Price Call: SELL | Target Price: 2.10 |
Media sector
Maintain underweight
As expected, September's gross advertising expenditure (adex) for TV and print media combined showed a sequential monthly contraction of 18.1%, following the bumper August adex (due to Hari Raya and Merdeka festivities), according to Nielsen Media Research (NMR). On year-on-year (y-o-y) basis, adex growth moderated to 5.1% in Septemebr (August: +9.7% y-o-y).
Print: Bearing in mind the ad rate hike effective January 2011, the print media showed positive y-o-y growth of 7% in September, although it has moderated (August: +14.1% y-o-y). On a month-on-month (m-o-m) basis, the print media contracted 21.2%, surprisingly due to the Malay dailies' 37.5% m-o-m contraction. Prior to September, the Malay dailies' adex growth has been quite strong since February, with a monthly sequential growth of 15.5%, compared with English (8.5%) and Chinese (5.8%) dailies.
Media Chinese International Ltd's (MCIL) newspapers recorded stronger y-o-y numbers across the board, compared with other Chinese dailies. Star Publications (M) Bhd had a relatively decent month as adex grew 1.8% y-o-y (-7.1% m-o-m).
TV: TV adex in September moderated further since July with only 2.9% y-o-y growth (August: +4.4% y-o-y), mainly supported by strong numbers from TV3 and 8TV. Collectively, adex for Media Prima's channels held up quite well with 8.6% y-o-y growth (-12.1% m-o-m). In comparison, TV1 and TV2 combined recorded -27.5% y-o-y growth (-26.5% m-o-m).
For the remainder of 2011, we expect adex growth to moderate further due to lack of festivities or big events and a high base effect in 4Q10. Looking at 2008 elections, a snap election before 2012 will have a positive though not significant impact on the 2011 adex. Also, global economic uncertainties have resulted in advertisers being more prudent on ad spend. Year to date, adex grew 11%. For now, we maintain our projected 2011 adex growth of 9%, and expect adex growth to slow down to 3.6% in 2012.
The risks include: 1) stronger-than-expected consumer spending and demand (and hence, adex), possibly due to a faster-than-expected recovery in the global economy, among others; 2) lower-than-expected newsprint/content costs; and 3) stronger-than-expected ringgit vs the US dollar.
No change to our earnings forecasts. Maintain 'underweight' on the sector. We believe the sector lacks catalysts as adex growth may weaken further if a double-dip global economic recession materialises. Historically, we note that the GDP multiplier effect on adex growth weakens (potentially deteriorating by as much as half) when GDP growth softens. ' RHB Research, Oct 31
This article appeared in The Edge Financial Daily, November 1, 2011.
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