KUALA LUMPUR: The worst is likely over for the media sector following the easing of restrictions, and the economic reopening and investors should take this opportunity to nibble in the sector while valuations are still undemanding.
Hong Leong Investment Bank Bhd (HLIB Research), in a note, said leading indicators such as the improving consumer and business sentiment, projected economic growth for Malaysia, which HLIB Research estimates a 5.5 per cent year-on-year (YoY) for 2022, are pointing towards a brighter advertising expenditure (adex) outlook.
The bank-backed research report said based on Nielsen report, the ten-month (10M) 2021 adex grew by 17.9 per cent YoY, mainly led by the free-to-air (FTA) segment.
However, the segments that dragged the overall adex recovery in 10M 2021 were most impacted by the lockdown, namely newspapers, magazines and cinema.
Notably, FTA TV remained resilient in 2021 as advertisers prefer FTA TV due to its wider audience reach as people spent more time at home during the lockdown, HLIB Research noted.
The research firm also noted that the local media sector was under a structural decline where the traditional media pie size diminishes as the TV, print and radio segments face competition from new media such as streaming services and online news portals, while advertisers are also reallocating their ad spend towards Facebook and Google.
Further aggravating this, Covid-19 impacted segments most vulnerable to lockdown restrictions, i.e. newsprint, radio and event, while pay-TV subscription and home shopping revenues were also adversely affected by the lower household dispensable income.
Nonetheless, positive efforts were taken by the local media players to arrest the decline in earnings, including cost
rationalisation efforts, integrating and streamlining advertising solutions, disposal of loss making units, strengthening their digital media segments, and rolling out new product initiatives that cater to the shift in media consumption preferences, the firm said.
HLIB Research also noted that the Malaysian Institute of Economic Research (MIER) consumer sentiment index (CSI) recorded 101.7 in the third quarter (Q3) of 2021 compared to 64.3 in the second quarter (Q2) 2021 and 91.5 in Q3 2020.
The CSI also crossed the 100-point optimism threshold for the first time since Q3 2018, indicating consumer optimism following the easing of Covid-19 movement restrictions.
HLIB Research upgrades the media sector to Overweight from Neutral with these trends.
Top picks include Astro Malaysia Holdings Bhd, with a Buy call and a target price of RM1.40, which currently provides an attractive dividend yield at over 7 per cent.
Further, HLIB Research also named Media Prima Bhd with a Buy call and a target price of RM0.61) as the firm believes the future growth of the company is multi-pronged underpinned by the improved performance from its advertising segment, the positive contribution from its home shopping segment and the growth in content sales and distribution.
Source: New Straits Times
