RHB Research has maintained a “Neutral” call on the media sector with Astro as its core pick adding that the spectre of inflation and recessionary fears have taken the wind out of the media sector’s sails.
It said that given the uncertainties and market volatility, a nimble stock-picking strategy is apt.
The stockbroking firm said that the sector has de-rated by c.20% from YTD highs on heightened geo-political risks and rate hike expectations.
It says that it sees a challenging adex environment and structural issues keeping a tight lid on sector sentiment adding its stock calls reflect a bottom-up approach and are aligned to stock-specific catalysts.
On stock picks, it said that it continues to like Astro Malaysia (Astro), as its digital pivot ring-fences the threat from streaming services, with a strong content value proposition to boast.
On Astro’s digital pivot should mitigate pressure on subscription revenues in the medium to longer term, RHB said that It will not be spared the rising interest rate environment and inflationary pressures.
It said that it notes the good execution of the group’s transformation plans with the addition of more streaming video on demand (SVOD) services set to further reinforce its content value proposition.
On Media Prima, it said that (MPR) predisposition to economic conditions means underlying revenue/earnings are likely to be severely crimped if adex takes a turn for the worse in the ensuing months. Its gross TV adex (Nielsen) showed four consecutive months of 2-18% declines from February-May (YTD-5M22: -4.5%).
It said that its analysis on the performance of Astro and MPR in the previous two general elections (GEs) – GE13 and GE14 – suggests some discernible trends, albeit not definitive.
“For GE13, the highest gains for both stocks (9-17%) were realised if investors bought 3-6 months ahead of the polling day. For GE14, investors were better off accumulating the stocks near the polling day, with the highest gains notched three months thereafter,” it said.
