THE earnings delivery of media companies under Kenanga Research (Kenanga) coverage was weaker sequentially in quarter four calendar year 2024 (4QCY24).
“We maintain our CY25 advertising expenses (adex) contraction assumption of 2.8% year-on-year (YoY), reflecting a milder decline compared to CY24’s contraction of 7.1% YoY,” said Kenanga in the recent Sector Update Report.
This expectation is underpinned by an anticipated spillover in advertising spend from 4QCY24 into 1QCY25, as advertisers defer their adex spend to early CY25, to align with Chinese New Year (CNY) campaigns.
Recall that CNY in CY25 falls earlier on 29 Jan, vis-à-vis 10 Feb in CY24. “In line with this, we anticipate declines in CY25 adex for digital media (-25% YoY), newspapers (-5% YoY), magazines (-8% YoY) and cinema (-3% YoY) will more than offset growth in FTA TV (+3% YoY) and radio (+2% YoY),” said Kenanga.
After factoring in their adex assumptions, Kenanga projects a 64% YoY decline in cumulative core net profit for media companies under their coverage in the financial year 2025 and 2026, primarily driven by ASTRO.
“We maintain our UNDERWEIGHT stance on the sector, as persistent competitive pressures weigh on top-line, while structural cost burdens erode profitability,” said Kenanga.
Traditional media players face escalating legacy expenses, including:
(1) Newspapers – outlays for newsprint, ink, and distribution logistics.
(2) Radio, FTA and Pay TV – opex for broadcasting infrastructure (example: transmission towers and satellite uplinks).
These challenges are exacerbated by a large and aging workforce with outdated skill sets and creative approaches that do not resonate with younger and digital-savvy audiences.
These structural headwinds make it increasingly difficult for smaller legacy media companies to be profitable, vis-à-vis new media players and KOLs that operate with lean, agile business models.
Even larger traditional media firms are not immune, with certain occasionally dipping into quarterly losses.
“We do not have any stock picks within the sector,” said Kenanga. —Mar 12, 2025
Main image: Open Geeks Lab
