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
29 April 2010
MARKET DATELINE

Media Recom : Neutral

(Maintained)
Another Strong Month For Print and TV Adex

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 2.25 2.55 16.3 18.0 +>100 10.1 13.8 12.5 0.4 0.3 4.4 OP
MCIL^ Mar 0.83 1.09 8.8 8.4 19.4 -4.1 9.4 9.8 net cash net cash 5.5 OP
Astro^ Jan 4.24 4.30 7.4 11.6 -38.9 57.7 57.6 36.5 1.0 1.0 3.3 MP
Star Dec 3.34 3.60 22.6 25.8 15.4 14.0 14.8 13.0 net cash net cash 6.2 MP
Sector Average* 42.9 18.6 12.8 19.3
^FY10 & 11 refer to FY11 & FY12 *excluding Astro

♦ Mar’s adex for print and TV media rose 25.3% yoy. According to Chart 1: Relative Performance To
FBM KLCI
Nielsen Media Research (NMR), Mar’s gross ad spend for print and TV
media rose 25.3% yoy with both print and TV media reporting yoy growth Media Prima

of 25.8% and 24.6% respectively. Astro

♦ Print media – yoy growth was again led by the Chinese Dailies. MCIL
Mar’s yoy adex growth for the print media was led by the Chinese dailies
FBM KLCI
(+33.4% yoy), where all dailies reported stronger numbers. The English
Star
dailies saw gross adex growth of 28.8% yoy, led by Malay Mail (+101.8%
yoy) and Star (+43.2% yoy). As for the Malay segment, gross adex grew
by 14.7% yoy mainly due to the stronger adex for Harian Metro (+26.0%
yoy) and Berita Harian (+20.0% yoy). The stronger numbers, however,
were offset by the weaker adex for Utusan, which fell -13.8% yoy.

♦ TV gross adex – another strong month. Mar, was another good month
for TV, where gross adex grew by 24.6% yoy. All the FTA TV channels
posted stronger yoy growth except for TV1, where adex growth dropped
by 31.4% yoy.

♦ 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% and the average GDP multiplier of 2.1x (between PER = 11x
1989 and 2008), 2010 gross adex could see growth of 9.5%. Apart from
higher overall ad spending anticipated as the global economy recovers, PER = 10x
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.

♦ Investment case. We have retained our Neutral stance on the sector.

David Chong, CFA
(603) 9280 2179
Please read important disclosures at the end of this report. david.chong@rhb.com.my

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Mar 2010 Print and TV Ad Spend

♦ Mar’s adex for print and TV media rose 25.3% yoy. According to Nielsen Media Research (NMR), Mar’s gross
advertising expenditure (adex) for print and TV media rose 25.3% yoy and 26.6% mom. Mar’s yoy growth was
led by the print segment (+25.8% yoy; +43.1% mom) while the TV media also reported commendable growth of
24.6% yoy (+8.6% 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 growth, we believe this was due to
seasonal effects given that Feb was a shorter working month as well as Chinese New Year public holidays.

♦ Print media – yoy growth was again led by the Chinese dailies. For the print media segment, Mar’s yoy
adex growth was once again led by the Chinese dailies (+33.4% yoy; +28.1% mom) with stronger numbers
generally being posted across the board (China Press: +80.4% yoy, +65.8% mom; Sin Chew: +23.3% yoy,
+27.3% mom; and Guang Ming: +18.2% yoy, -4.6% mom). The English dailies also recorded better yoy figures
(+28.8% yoy; +47.9% mom) thanks largely to Star (+43.2% yoy; +53.7% mom). As for the Malay dailies, gross
adex jumped by 14.7% yoy (+52.0% mom), mainly due to stronger adex for Harian Metro (+26.0% yoy;
+43.3% mom) and Berita Harian (+20.0% yoy; +68.8% mom). These numbers, however, were partly offset by
the weaker adex for Utusan Malaysia (-13.8% yoy; +57.3% mom).

For the quarter-ended 31 Mar, Star reported the strongest yoy adex growth of 102.3% yoy. Consequently, Star’s
1Q adex market share grew to 31% from 28% in 1Q09. MCIL also recorded stronger 1Q10 adex growth of 94.7%
yoy due to stronger numbers reported by China Press and Sin Chew. NSTP’s 1Q gross adex grew by a slower
7.5% yoy as the stronger 1Q adex from the malay dailies was partly offset by the contraction in adex for NST.

♦ TV gross adex – another strong month. Mar TV adex grew 24.6% yoy (+8.6% 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
except for TV1, which dropped 31.4% yoy (-11.5% mom). Collectively, Media Prima’s channels posted yoy
growth of 25.4% (+9.9% mom) led by TV9 +43.3% yoy (+23.6% mom) and NTV7 +30.6% yoy (-8.0% mom),
while TV3 also grew 22.3% (+21.0%).

YTD (Jan-Mar), gross adex for Media Prima’s channels was up 34.6% (9.9% mom), with stronger 1Q10 adex
being posted across the board (TV9: +62.0% yoy; NTV7: +35.6% yoy; 8TV: 34.0% yoy; and TV3: 26.9%).
Although the slower growth by TV3 (vis-à-vis the other channels) partly reflects the station’s higher adex base,
we are encouraged by the decent growth shown by the station especially given that it has the lowest discount
among the channels.

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% 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.

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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=RM1.09). No change as well to our
fair values and recommendations for Media Prima (OP, FV=RM2.55) and Astro (MP, FV=RM4.30).

♦ 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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 29 April 2010

Chart 8: YoY Adex Growth Chart 9: Quarterly Adex – Print & TV

(R M m)
1,600

1,400

1,200

1,000

800

600

400

200

-
3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10
P rint TV

Source: NMR

Chart 10 : Media Prima – YoY Adex Growth Chart 11: Star – YoY Adex Growth

Source: NMR

Chart 12: MCIL – YoY Adex Growth Chart 13: NSTP – YoY Adex Growth

Source: NMR

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 29 April 2010

Table 2: Gross Adex

RMm 1Q09 4Q09 1Q10 QoQ (%) YoY (%) Comments
NSTP 203.3 257.4 218.6 (15.1) 7.5
- Harian Metro 76.7 103.5 90.1 (12.9) 17.5
- Berita Harian 52.3 62.3 56.1 (10.0) 7.2
- NST 74.3 91.6 72.4 (20.9) (2.5)

Star 181.1 240.2 233.0 (3.0) 28.7

MCIL 144.4 187.2 182.6 (2.4) 26.4

- Sin Chew 80.4 95.8 94.0 (1.9) 17.0
- Guang Ming 15.0 17.8 17.5 (1.3) 19.0
- China Press 38.3 59.3 59.2 (0.2) 54.6
- Nanyang 10.8 14.4 11.9 (17.2) 10.3

Media Prima 387.2 673.4 520.9 (22.6) 34.6

- TV3 179.8 310.2 228.2 (26.4) 26.9
- 8TV 80.7 119.1 108.1 (9.2) 34.0
- NTV7 78.1 132.1 105.9 (19.8) 35.6
- TV9 48.5 112.0 78.7 (29.7) 62.0
Source: NMR

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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.

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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

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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