MALAYSIA’S media sector has not been significantly buoyed by the transition to the endemic phase with recovery in adex (advertising expenditure) numbers been restricted to the digital segment.
Having realised the effectiveness of digital advertising (in terms of a greater market reach and better demographic group targeting) during the pandemic, Kenanga Research expects advertisers to continue shying away from the traditional media in the near future.
“We expect a seasonally stronger 2H backed by (i) major sporting events such as the World Cup (which will draw advertisers to television advertising); and (ii) the year-end holiday season advertising campaigns,” observed analyst Ahmad Ramzani Ramlil in a media sector update.
“However, we are mindful of the increased content costs (especially for the sporting event) as well as a cut-back in advertising on luxury goods as the market responds to down-trading by consumers amid a high inflation environment.”
Against such backdrop, Kenanga Research reiterated its “neutral” outlook on Malaysia’s media sector by expecting the adex recovery to sustain into 2H 2022 as economic recovery pans out in the post-pandemic era.
“However, we are mindful of the risk of advertisers cutting back on advertising spending in anticipation of slowing consumer spending as sustained elevated inflation eats into the disposable income of consumers,” cautioned the research house.
“We continue to like Media Prima Bhd (“outperform”; TP: 74 sen) for its Omnia platform that is highly popular with advertisers given its ability to offer integrated advertising solutions.”
According to Nielsen data, the overall adex grew 4.7% from RM1.4 bil to RM1.5 bil in 2Q CY2022 as Malaysia moved from the pandemic to the endemic phase although a 55% jump in digital adex spending was partially offset by a 4.0% contraction in non-digital adex spending.
Now touted as the second largest media segment, digital channels continued their resilient growth as free-to-air (FTA) TV, the largest channel in the sector, continued to contract as advertisers shifted their interest away from the traditional channel.
In this regard, Astro Malaysia Holdings Bhd (“market perform”; target price: RM1) which is Kenanga Research’s primary TV player reported flat-to-contracting viewership numbers. Overall, the FTA TV segment saw a decrease in adex of 8.5% year-on-year.
Elsewhere, the research house noted that cinemas continued to show massive recovery as their adex rose more than 100% to RM23.1 mil. Radio also showed some improvement with 7.5% growth but newspaper adex seemed to have stagnated with a flat topline.
“The continued growth of digital channels resulted in them commanding a 21.9% market share or up from 14.8% in 2Q CY2021,” the research house pointed out.
On a quarter-on-quarter (qoq) basis, total gross adex fell 3.6% with contractions reported across multiple channels. FTA TV saw the largest fall in terms of ringgit value as adex fell 6.9% to RM802.7 mil from RM862.4 mil.
Cinema adex fell 36% as the initial rush of cinema patrons tapered off. Digital and magazines were the only channels that displayed meaningful growth at 6.6% and 22.0% respectively.
“Overall, the decrease in adex was within expectations,” reckoned Kenanga Research. “1Q CY2022 numbers exceeded pre-pandemic numbers as advertisers showed a renewed interest in spending following the lifting of movement restrictions.” – July 19, 2022
