IF there is one lucrative business opportunity or major event for the media industry to look forward to in the near future, it has to be the 15th General Election (GE15).
This is because the election – in the words of CGS-CIMB Research – will serve as a key catalyst to spur the earnings of the four media houses under its radar (Astro Malaysia Holdings Bhd, Media Prima Bhd, Star Media Group Bhd and Media Chinese International Bhd).
“If the GE15 takes place in 2021, an election ad buying bonanza could ensue,” projected analyst Kamarul Anwar in a media sector outlook.
“Perikatan Nasional’s election director and Senior Minister (International Trade cluster) Datuk Seri Mohamed Azmin Ali told The Star in a Nov 29 interview that the ruling coalition would have called for an election in October had it not been for COVID-19 cases escalating again in Malaysia.”
Prior to the most recent general election in May 2018, Kamarul noted that political parties and government organisations splurged RM671 mil (before discounting factor) for advertisements on traditional media. Their advertisement buys made up 13% of the year’s market value.
To recap, the local media sector’s distressed valuation careened further to a new all-time low in 2020 after enduring a years-long digital onslaught.
In mid-March, uncertainties over what the movement control order (MCO) would unleash on the economy sparked a market sell-off with the already battered media stocks not spared, falling by as much as 7.7% to 47% over the past one year (till Dec 7).
However, Kamarul observed that the sector was accorded a lifeline with the 41.4% quarter-on-quarter traditional advertising expenditure (adex) growth in the third quarter of 2020 (prior to discounting factor).
“In our view, (this) showed there is still demand for traditional media’s ad space,” he pointed out.
“Once the COVID-19 vaccines are distributed, we foresee that this would nudge ad buys in expectation of consumers’ recovering purchasing power. Yet, realistically, we do not think the media companies’ turnovers would return to pre-COVID-19 levels.”
With rock-bottom valuations and better year-on-year earnings prospects in CY2021F, CGS-CIMB Research upgraded the media sector’s outlook to “overweight” from “neutral”.
All four media companies under the research house’s coverage are rated “add” with each of them carrying a unique proposition:
- Astro (top pick) with alluring CY2020-2021F yields of 7.6% to 8%
- Media Prima premised on a turnaround story in CY2021F
- Star offers deep-seated value, and merger-and-acquisition (M&A) and privatisation plays; and
- Media Chinese being the dark horse – should the skies open again for tourism, it should defy expectations to deliver profits in CY2022F. – Dec 8, 2020
