PP 7767/09/2010(025354)

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Sector Upda te
24 March 2010
MARKET DATELINE

Media Recom : Neutral

(Maintained)
Feb ’10 Adex – Up 29.1% YoY

Table 1 : Media Sector Valuations

Core Core Net
Fair EPS EPS GWTH PER Gearing GDY
FYE Price value (sen) (%) (x) (x) (%) Rec
(RM) (RM) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11 FY10
Media Prima Dec 1.95 2.23 14.8 15.8 +>100 6.7 13.1 12.3 0.4 0.3 5.1 OP
MCIL^ Mar 0.75 0.92 8.8 8.4 19.4 -4.1 8.6 8.9 net cash net cash 6.0 OP
Astro^ Jan 4.25 4.30 7.4 11.6 -23.5 57.7 57.8 36.6 0.7 0.7 3.3 UP
Star Dec 3.42 3.60 22.6 25.8 15.4 14.0 15.1 13.3 net cash net cash 6.1 MP
Sector Average* 38.4 17.9 12.4 19.4
^FY10 & 11 refer to FY11 & FY12 *excluding Astro

♦ Feb’s adex for TV and print media rose 29.1% yoy. According to Chart 1: Relative Performance To
FBM KLCI
Nielsen Media Research (NMR), Feb’s gross ad spend for TV and print
media rose 29.1% yoy with both TV and print media reporting yoy growth
Media Prima
of 55.3% and 11.7% respectively.
Astro
♦ Print media – yoy growth was led by the Chinese Dailies. Feb’s yoy
adex growth for the print media was led by the Chinese dailies (+42.6% FBM KLCI
yoy), where all dailies reported stronger numbers. The English dailies also
saw stronger gross adex growth of 5.4% yoy, led by Star (+16.5% yoy) MCIL
Star
and Malay Mail (+16.0% yoy), partly offset by the weaker numbers
reported by The Sun (-20.0% yoy) and New Straits Times (-9.5% yoy).
As for the Malay segment, gross adex declined by 2.6% yoy on weaker
numbers for Utusan Malaysia (-27.9% yoy) and Berita Harian (-4.6%
yoy).

♦ TV gross adex – two consecutive months of stronger yoy adex

growth. TV gross adex reported two consecutive months of stronger yoy
adex growth with Feb TV adex growing by 55.3% yoy largely due to low
base effect as a result of weak economic conditions last year. The
stronger yoy TV adex was led by TV2 (+120.5% yoy), of which, we
believe was aided by their repositioning exercise last year.

♦ Adex outlook. We expect 2010 to be a relatively better year for ad

PER = 12x
spending, especially as compared to 2009. Based on our projected 2010
GDP growth of 4.5% (-1.7% in 2009) and the average GDP multiplier of PER = 11x
2.1x (between 1989 and 2008), 2010 gross adex could see growth of
9.5%. Apart from higher overall ad spending anticipated as the global PER = 10x
economy recovers, adex growth in 2010 would also be supported by “ad-
friendly” events such as the 2010 FIFA World Cup, Thomas/Uber Cup and
the Commonwealth Games.

♦ Risks. The risks include: 1) weaker-than-expected consumer spending

and demand (and hence, adex), which could be due to a slower-than-
abc
expected recovery in the global economy, among others; 2) higher-than-
expected newsprint/content costs; and 3) weaker-than-expected RM (vs.
the US$). KLCI

♦ Forecasts. No change to our earnings forecasts for now. David Chong, CFA
(603) 9280 2179
♦ Investment case. We have retained our Neutral stance on the sector. david.chong@rhb.com.my

Please read important disclosures at the end of this report.

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Feb 2010 Print and TV Ad Spend

♦ Feb’s adex for TV and print media rose 29.1% yoy. According to Nielsen Media Research (NMR), Feb’s gross
advertising expenditure (adex) for TV and print media rose 29.1% yoy but was down 9.8% mom. Feb’s yoy
growth was once again led by the TV segment (+55.3% yoy; -1.1% mom) while the print media also reported
commendable growth of 11.7% yoy (-16.6% mom). On the whole, we believe this strong yoy growth was mainly
due to the low base effect as a result of the weak economic conditions a year ago. As for the mom decline, we
believe this was mainly a reflection of Feb being a shorter working month as well as Chinese New Year public
holidays.

♦ Print media – yoy growth was led by the Chinese dailies. For the print media segment, Feb’s yoy adex
growth was led by the Chinese dailies (+42.6% yoy; -13.4% mom) with stronger numbers generally being posted
across the board (Sin Chew: +35.5% yoy, -14.4% mom; Nanyang: +70.8% yoy, +8.0% mom; Guang Ming:
+76.5% yoy, +6.8% mom; and Kwong Wah: +77.8% yoy, +10.6% mom). The English dailies also recorded
better yoy figures (+5.4% yoy; -18.2% mom), which was led by the Star (+16.5% yoy; -20.7% mom) and Malay
Mail (+16.0% yoy; -19.9% mom). These stronger numbers were partly offset by weaker numbers reported by
The Sun (-20.0% yoy; -16.6% mom) and New Straits Times (-9.5% yoy; -13.7% mom).

As for the Malay dailies, gross adex declined by 2.6% yoy (-17.3% mom), mainly due to weaker adex for Utusan
Malaysia (-27.9% yoy; -25.7% mom) and Berita Harian (-4.6% yoy; -17.4% mom). These weaker adex
numbers, however, were cushioned by stronger numbers reported by Kosmo (+41.2% yoy; +1.0% mom) and
Harian Metro (+9.0% yoy; -15.6% mom).

♦ TV gross adex – still going strong. Feb TV adex grew 29.1% yoy (-1.1% mom), although the strong growth
rate was mainly a reflection of last year’s low base. All the FTA TV channels posted stronger yoy growth across
the board led by TV2 (+120.5% yoy; +14.9% mom), of which, we believe, was aided by their respective
repositioning exercises last year. Collectively, Media Prima’s channels once again posted yoy growth of 51.3% (-
2.6% mom) led by 8TV’s adex growth of 74.3% yoy (+8.9% mom) and NTV7’s adex growth of 72.5% yoy
(+1.1% mom). This reinforces our view that Media Prima would be the prime beneficiary of the faster recovery in
TV adex.

Adex Outlook

♦ Adex outlook. We expect 2010 would be a relatively better year for ad spending, especially as compared to
2009. Historically, there has been a close correlation between GDP growth and adex growth (correlation of 89.7%
for 1989-2008). Based on our projected 2010 GDP growth of 4.5% (-1.7 in 2009) and the average GDP multiplier
of 2.1x (between 1989 and 2008), 2010 gross adex could see growth of 9.5%. Apart from higher overall ad
spending anticipated as the global economy recovers, adex growth for 2010 would also be supported by “ad-
friendly” events such as the 2010 FIFA World Cup, Thomas/Uber Cup and the Commonwealth Games.

Risks

♦ Risks to our view. The risks include: 1) weaker-than-expected consumer spending and demand (and hence,
adex), which could be due to a slower-than-expected recovery in the global economy, among others; 2) higher-
than-expected newsprint/content costs; and 3) weaker-than-expected RM (vs. the US$).

Forecasts And Assumptions

♦ No change to our net profit forecasts. No change to our earnings forecasts for now.

Valuations And Recommendation

♦ Valuations and recommendations unchanged. Our fair values and recommendations remain unchanged for
the print media players, i.e. Star (MP, FV=RM3.60) and MCIL (OP, FV=RM0.92). No change as well to our
fair value and recommendation for Media Prima (OP, FV=RM2.23). We have, however, downgraded the
recommendation on Astro (FV=RM4.30) to Underperform from Trading Buy previously, given its share price
has run up closer to the conditional offer price of RM4.30/share.

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♦ Sector call maintained Neutral. No change to our Neutral stance on the sector.

Chart 2: Print and TV ADEX Chart 3: ADEX By Company

Source: NMR

Chart 4: Malay Print ADEX By Title Chart 5: Chinese Print ADEX By Title

Source: NMR

Chart 6: English Print ADEX By Title Chart 7: TV ADEX By Channel

Source: NMR

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Chart 8: YoY Adex Growth Chart 9 : Media Prima – YoY Adex Growth

Source: NMR

Chart 10: Star – YoY Adex Growth Chart 11: MCIL – YoY Adex Growth

Source: NMR

Chart 12: NSTP – YoY Adex Growth

Source: NMR

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Chart 13: MediaC Technical View Point

♦ After consolidated near the support region at
RM0.55, the share price of MediaC kicked off a
significant rally in early Mar 2010.

♦ Its medium-term chart outlook has also turned

bullish following a fresh cut of the 10-day SMA to
above the 40-day SMA.

♦ As a result, the stock surpassed an important range

resistance at RM0.63, and touched a high of
RM0.735 in a single push.

♦ Although it encountered a sizeable retracement, it

regained its upward momentum regained quickly
and pushed it to a fresh high of RM0.76, before
ending at RM0.75 yesterday.

♦ Technically, the recent uptrend still have legs, and

the stock is seen ready to retest the RM0.78 crucial
resistance level soon.

♦ If it removes this hurdle, it will head towards the

target resistance at RM0.88 on follow-through
support.

IMPORTANT DISCLOSURES

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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

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Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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