KUALA LUMPUR (Jan 6): Hong Leong Investment Bank (HLIB) Research predicts that the worst is likely to be over for the media sector following the easing of restrictions linked to the pandemic and the reopening of the economy.
In a note released Thursday, Jan.6, its analyst Tan Kai Shuen believes that a full lockdown can be avoided in the future, which will help pave the way for a more sustainable recovery path for the media industry.
He said Malaysia is also now on a more solid footing to better manage Covid-19 given a wider range of tools at its disposal such as teen inoculation, booster shots and counter pills. disease.
“As leading indicators such as improving consumer and business sentiment, and forecast economic growth for Malaysia point to a more favorable outlook for ad spending (adex), we believe investors should seize this opportunity to nibble in the sector when valuations are still not demanding, “he said in a note on Thursday.
Based on a Nielsen report, Tan said that for the first 10 months of 2021 (10M21), adex grew 17.9% year-over-year, mainly thanks to the free segment (FTA).
“The segments that drove the index’s overall rally at 10M21 are those that have been most affected by the foreclosure, namely newspapers, magazines and film.
“Notably, FTA TV (TV) remained resilient in 2021, with advertisers preferring FTA TV because of its larger audience, as people spent more time at home during the lockdown,” he said. .
Tan further noted that the Malaysian Institute of Economic Research (MIER) Consumer Confidence Index (CSI) recorded 101.7 points in the third quarter of last year (3Q21), a marked improvement over to the sequential sequence and the same period last year.
He said the CSI also crossed the 100-point optimism threshold for the first time since 3Q18, indicating consumer optimism over the easing of movement restrictions from Covid-19.
On the other hand, Tan said that the MIER Business Conditions Index (BCI) recorded 97 points in 3Q21, indicating a recovery in the business climate after economic activity gradually resumed as restrictions relax.
Improvements in CSI and BCI, he said, are positive indications of an economic recovery, which should bode well for future indexing spending.
Meanwhile, Tan viewed the local media industry as in structural decline where the size of the traditional media pie shrinks as the television, print and radio segments face competition from new media such as streaming services and online news portals, while advertisers are also reallocating their ad spending. to Facebook and Google.
“What makes the situation worse are the segments affected by Covid-19 most vulnerable to lockdown restrictions, namely newsprint, radio and events, while income from pay-TV subscriptions and purchases homes have also been affected by the decline in disposable household income, ”he added.
Nonetheless, Tan observed that positive efforts were being made by media players to stop the decline in revenues.
This includes cost rationalization efforts, the integration and rationalization of advertising solutions, the divestiture of loss-making units, the strengthening of digital media segments as well as the deployment of new product initiatives that respond to changing preferences. media consumption, he explained.
To this end, HLIB Research has raised its call on the media sector to ‘overweight’ instead of ‘neutral’, with the company’s top pick for the sector being Astro Malaysia Holdings Bhd, having a ‘buy’ call and price. target (TP) of RM 1.40 on the share, and which currently offers an attractive dividend yield of over 7%.
In addition, the research firm also considers Media Prima Bhd as its other top choice for the media industry after giving a “buy” call and a TP of 61 sen on the stock.