Media sector to see strong adex growth

The media sector is expected to end the year with a stronger performance as advertisement expenditure (ADEX) is projected to close at double-digit growth.

OSK Research said according to the New York-based global marketing research firm AC Nielsen, as of July, the ADEX jumped 12 per cent year-on-year to RM4.7 billion on the back of resilient advertising spending.

"For both the television and newspaper segments, the ADEX grew by nine per cent and 14 per cent respectively year-to-date," it said in a research note today.

The research house also believes that the sector will be among the beneficiaries if a national poll is called in the second half of this year, coupled with the major festive seasons ahead.

"We see strength in the sector's earnings as the ADEX is likely to close the year at two to three times our GDP forecast," it said.

For 2011, OSK Research has forecast the GDP growth to grow 5.3 per cent.

It said, should investors’ fear of a global economic meltdown materialise and spark a sell-off in commodities, newspaper publishers may benefit in terms of cost savings from newsprint, boosted by the current weakness in the US dollar versus the ringgit.

OSK Research remains cautiously optimistic of the media sector based on the stated factors.

It reiterated an "overweight" call on the sector and included weaker newsprint prices and a continued downtrend in the dollar against the ringgit as the key re-rating catalyst.

OSK Research also said its top pick of the sector were Media Chinese International Ltd and Media Prima Bhd.

Media Chinese International Ltd holds a fair value (FV) of RM1.51, given its current attractive valuation and generous yield of six per cent.

Media Prima Bhd has a fair value of RM3.09 on account of its rejuvenated print media business and diversified exposure across all media platforms. -- Bernama