Media sector to benefit from higher adex

Traditional media and travel segments expected to show gradual recovery following vaccination rollout globally

by LYDIA NATHAN / Pic by TMR FILE PIX

THE media sector should recover this year buoyed by improving advertisement expenditure (adex) through major events such as UEFA Euro 2020, Premier League and the National Basketball Association (NBA).

AmInvestment Bank Bhd (AmInvest) stated traditional media and travel segments are expected to show gradual recovery following vaccination rollout globally, including in Malaysia, and lead to sentiment recovery.

In a research note yesterday, the investment bank found weak adex sentiment and pandemic-related restrictions had impacted the performance of traditional media adex such as in print, TV and radio, while circulation numbers continued to dwindle since the Covid-19 pandemic outbreak last year.

It added that offline events, travel and content production were also impacted.

“Segments such as home shopping and digital, however, saw positive performance as the Movement Control Order witnessed shifts in consumer habits.

“We gather that momentum in-home shopping and digital is expected to continue, with the growing trend towards electronic and mobile commerce platforms,” AmInvest wrote.

It upgraded its recommendation on the media sector to ‘Overweight’ from ‘Neutral’ on optimism of adex recovery.

The revised recommendation is supported by the cheap valuations of media companies like Astro Malaysia Holdings Bhd, Media Prima Bhd and Star Media Group Bhd.

AmInvest also identified the common environmental, social, and governance practices of the three companies, including energy efficiency, recycling and waste management, content management, customer reach, board diversity and transparency.

The bank maintained its ‘Buy’ recommendation for Astro with an unchanged forecast and fair value of RM1.83 per share.

It noted Astro has an extensive reach among Malaysians across TV, radio, digital and commerce with a 75% household penetration through pay-TV and NJOI in the financial year 2020 (FY20), while its home shopping registered 2.2 million customers in that year, a 25% increase year-on-year.

“We continue to like Astro for its strength in vernacular content and high household penetration rate of 74% as at FY21, its move to expand its offerings by aggregating streaming services via over-thetop (OTT) partnerships and launching of its own Sooka OTT and the attractive dividend yield of 7% to 9%”.

AmInvest maintained a ‘Buy’ call on Media Prima with an unchanged forecast of 80 sen per share on the back of optimism on the media conglomerate’s strategies in home shopping and digital initiatives, adex recovery and better monetisation of its extensive reach across different segments.

AmInvest remains cautious about Star Media’s prospects due to its lack of diversification from traditional media segments relative to other players.

“However, the performance of its print, radio and events segments is expected to recover following expectations of gradual improvement in consumer sentiments following the rollout of Covid-19 vaccinations.

“We view its move to cease the operations of its video-on-demand platform, Dimsum, will lead to improvements in group performance,” it said.

The research house however maintained its ‘Buy’ call for Star Media with an unchanged forecast of 53 sen per share.