Prospects remain muted for media sector — AmInvestment

KUALA LUMPUR (Dec 31): AmInvestment Bank Bhd Research has maintained its “Neutral” recommendation on the media sector for the next 12 months as prospects remain muted.

In a note today, it stated that the sector continues to be weighed down by the worsening performance of traditional media amid structural shift to digital, declining print circulation, lacklustre advertising expenditure (adex) and growth in digital revenues and non-adex segments still unable to offset the decline in traditional media.

It noted that on a year-on-year (y-o-y) basis, traditional media segments such as free-to-air (FTA) television, newspaper, radio and magazine adex declined by 13%, 18%, 3% and 19% respectively due to a structural shift towards digital content.

“Meanwhile, 3QCY19 also saw muted consumer sentiment as the Malaysian Institute of Economic Research’s Consumer Sentiment Index fell to 84 in 3QCY19, the lowest reading since 4QCY17 as weak job outlook weighs on income expectations with consumers limiting shopping plans due to flagging purchasing power,” it said.

The research house is cautiously optimistic on the Malaysian adex market as events such as UEFA Euro 2020 and 2020 Summer Olympics will be held in 2HCY20, and a potential recovery in the consumer sentiment for the year could boost adex revenues slightly.

AmInvestment noted that newspaper circulation continues to dwindle as total newspaper circulation is declining across the board in 1HCY19, falling 13% y-o-y and 6% half-on-half.

The research house pointed out that major publishers such as Star Media Group Bhd and Media Chinese International Ltd had decided to withdraw their membership from the Audit Bureau of Circulations (ABC) Malaysia resulting in their publications The Star, Sin Chew, Guang Ming and China Press being excluded in the ABC’s audited circulation figures from January 2019 onwards.

It said media players have reported encouraging growth in their digital revenues although the total revenue is still in the single digit.

It stated that Media Prima’s digital segment is 4% of its group revenue for 9MFY19 (year to date: RM35 million) while Media Chinese’s digital contribution is reportedly around 8%.

“We are neutral on the development (transition to digital television broadcast) although media players with content on FTA channels might see the benefit of MYTV’s MyFreeView initiative as the 15 channels offer better audio and video quality,” AmInvestment said.

The research house said the implementation of digital service tax of 6%, effective Jan 1, 2020, might benefit media companies with television and over-the-top (OTT) segments such as Media Prima Bhd and Star Media.

“However, the extent to which local players might benefit is still unknown as higher prices alone might not deter consumers from consuming the content provided by foreign OTT players such as Netflix,” it said.

“This is due to differing preferences for content where consumers might choose a mix of local services for vernacular content and foreign services for Hollywood content,” it added.

Source: TheEdgeMarkets