CGS CIMB has made an “Overweight” call for the Media sector with Astro Malaysia Holdings Bhd and Media Prima Bhd as its top picks.
It said that besides benefiting from a growing ad market, entertainment and visual-based media companies have negligible exposure to variable costs.
The research house was of the view that the entertainment- and visual media-oriented stocks, namely Astro Malaysia and Media Prima, are not directly affected by the rising inflation owing to the nature of their high operating leverages.
It said that it expects the lifting of the lockdown and border reopening to galvanise ad sales in CY22F, but it cautions that the media sector’s top- and bottomline can be indirectly affected by the high inflation if consumer demand wanes and subsequently causes advertisers to trim their budget.
The stockbroking firm said that both Astro and Media Prima have been on a cost-management drive over the past few years since their toplines began to erode in the mid-2010s.
And now that the traditional advertising market is experiencing a renaissance after the initial wave of the streaming incursion in the mid-to-late-2010s, it said that having higher operating leverage could help relieve the aforementioned media companies’ margins.
On Astro Malaysia, the stockbroking firm has an “Add” recommendation for the stock with a TP of RM1.45 adding that it remains positive on prospects for Astro’s streaming integration strategy. “Although the line-up of third-party streaming services will only be completed sometime in CY23F, we believe its adex would recover in the interim, as it usually tracks FTA TV adex’s movements – if not outstrip the latter,” it said.
On Media Prima, It said that it has an “Add” recommendation for the stock with a trading price of RM0.96. It said that the group is seeing a resurgence in FTA ad sales, while its open-source policy of selling content to third-party streaming services should give it an income boost.
