Media│Media - overall January 26, 2015 IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA MALAYSIA MEDIA - OVERALL SECTOR NOTE Digital is key 2014 was a challenging year for the media sector, given weak consumer spending following the subsidy rationalisation exercise and tragic incidents that further dampened consumer sentiment. We expect a gradual recovery in 2015, especially in 2H after anxiety over GST implementation subsides and better operating efficiency in the sector. Figure 1: Survey of Malaysian households’ hours spent per day SOURCE: CIMB, NIELSEN, 4As We stay Neutral on the media sector due to the challenging operating environment caused by weak consumer sentiment on the back of uncertainty in the domestic economy. However, we still expect the sector to post a three-year EPS CAGR of 7.3%, mainly driven by Astro. Astro is our sector top pick due to its resilient earnings growth, dominant position and less reliance on adex market. 2014 in review The sector recorded a 3.5% yoy decline in core net profit to RM648m in 9M14 vs. RM672m in 9M13. However, excluding Astro’s contribution, the sector recorded a significant decline in earnings mainly due to lower adex spending across major traditional platforms like free-to-air (FTA) TV and print segments which fell by 10% and 11%. The weaker performance was attributable to poor consumer sentiment on the back of the government’s ongoing subsidy rationalisation, three misfortunate plane incidences (MH370, MH17 and QZ8501) and flooding in Peninsular Malaysia. Given the weaker earnings, the sector’s share prices fell by 5% on average in 2014, in line with the KLCI. Outlook for 2015 2015 could be another challenging year for the sector given persistently weak consumer sentiment on the back of the upcoming GST implementation. The recent fuel price drop may have minimal impact on consumer spending, given the uncertainty in the domestic economy. Nevertheless, we still expect the sector to record moderate growth in 2015, driven by a recovery in adex especially in 2H15 as anxiety over GST implementation subsides and better operating efficiency, following industry-wide cost rationalisation exercises carried out in 2014. We also expect the structural shift in adex to digital platforms to gain traction due to rising internet connectivity and the popularity of social media advertising. Notes from the Field ————————————————————————————————————————— Mohd Shanaz Bin NOOR AZAM T (60) 3 2261 9078 E [email protected]Show Style "View Doc Map" Contents 2014 IN REVIEW .................................................................. 3 OUTLOOK FOR 2015 .......................................................... 7 RISKS................................................................................. 13 VALUATION AND RECOMMENDATION ........................... 15 Highlighted Companies Astro Astro has completed its reinvestment strategy and we expect stronger ARPU growth, driven by a shift towards high-value added services. Home-shopping could be a new revenue driver. MCIL MCIL has the largest revenue exposure to the print segment. While we like its decision to diversify into the digital segment, we think rising competition regionally and locally could impact its performance. Media Prima Media Prima has completed its MSS exercise as part of its strategy to improve operating efficiency in 4Q14. The recent newsprint price hike is expected to address the expected decline in print contribution. Star Publications Star remains focused on its cost-savings initiatives to offset the impact from lower print adex and circulation volume. Its strategy to grow beyond the print segment is gaining traction, albeit gradually. The stock offers an attractive dividend yield.
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Media│Media - overall
January 26, 2015
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
MALAYSIA MEDIA - OVERALL
SECTOR NOTE
Digital is key 2014 was a challenging year for the media sector, given weak consumer spending following the subsidy rationalisation exercise and tragic incidents that further dampened consumer sentiment. We expect a gradual recovery in 2015, especially in 2H after anxiety over GST implementation subsides and better operating efficiency in the sector.
Figure 1: Survey of Malaysian households’ hours spent per day
SOURCE: CIMB, NIELSEN, 4As
We stay Neutral on the media sector due to the challenging operating environment caused by weak consumer sentiment on the back of uncertainty in the domestic economy. However, we still expect the sector to post a three-year EPS CAGR of 7.3%, mainly driven by Astro. Astro is our sector top pick due to its resilient earnings growth, dominant position and less reliance on adex market.
2014 in review The sector recorded a 3.5% yoy decline in core net profit to RM648m in 9M14 vs. RM672m in 9M13. However, excluding Astro’s contribution, the sector recorded a significant decline in earnings mainly due to lower adex spending across major traditional platforms like free-to-air (FTA) TV and print segments which fell by 10% and 11%. The weaker performance was attributable to poor consumer sentiment on the back of the government’s ongoing subsidy rationalisation, three misfortunate
plane incidences (MH370, MH17 and QZ8501) and flooding in Peninsular Malaysia. Given the weaker earnings, the sector’s share prices fell by 5% on average in 2014, in line with the KLCI.
Outlook for 2015 2015 could be another challenging year for the sector given persistently weak consumer sentiment on the back of the upcoming GST implementation. The recent fuel price drop may have minimal impact on consumer spending, given the uncertainty in the domestic economy. Nevertheless, we still expect the sector to record moderate growth in 2015, driven by a recovery in adex especially in 2H15 as anxiety over GST implementation subsides and better operating efficiency, following industry-wide cost rationalisation exercises carried out in 2014. We also expect the structural shift in adex to digital platforms to gain traction due to rising internet connectivity and the popularity of social media advertising.
2014 IN REVIEW .................................................................. 3 OUTLOOK FOR 2015 .......................................................... 7 RISKS ................................................................................. 13 VALUATION AND RECOMMENDATION ........................... 15
Highlighted Companies
Astro
Astro has completed its reinvestment strategy and we expect stronger ARPU growth, driven by a shift towards high-value added services. Home-shopping could be a new revenue driver.
MCIL
MCIL has the largest revenue exposure to the print segment. While we like its decision to diversify into the digital segment, we think rising competition regionally and locally could impact its performance.
Media Prima
Media Prima has completed its MSS exercise as part of its strategy to improve operating efficiency in
4Q14. The recent newsprint price hike is expected to address the expected decline in print contribution.
Star Publications
Star remains focused on its cost-savings initiatives to offset the impact from lower print adex and circulation volume. Its strategy to grow beyond the print segment is gaining traction, albeit gradually. The stock offers an attractive dividend yield.
Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends
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Digital is key 2014 IN REVIEW
A challenging year for media companies
In spite of promising prospects from the Visit Malaysia Year campaign and major sporting events like FIFA World Cup and Commonwealth Games, 2014 was a challenging year for the media companies in our coverage. The Malaysian media sector recorded a 3.5% yoy decline in core net profit to RM648m in 9M14 vs. RM672m in 9M13. However, excluding pay-TV operator, Astro, the media sector suffered a 19.9% yoy drop in 9MFY14 earnings. This was mainly due to lower adex spending, mainly across major traditional platforms like free-to-air (FTA) TV and print segments which fell by 10% and 11%, respectively, following weak consumer sentiment on the back of the ongoing subsidy rationalisation and the tragic MH370 incident. Apart from that, the seasonal recovery in demand at the beginning of the second half seemed weaker compared to the corresponding periods in the past as 3Q14 earnings fell by 8% sequentially, partly due to lower subs addition by Astro and persistent weakness in consumer sentiment following MH17, another unfortunate incident in Jul 14, and the fuel price hike in Oct 14.
Figure 3: Malaysian media sector revenue in 9M14 vs. 9M13
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SOURCES: CIMB, COMPANY REPORTS
In terms of earnings growth, Astro led the sector with 12.7% yoy core net profit growth in 9M14 due to rising ARPU, subscribers and licensing income growth. Apart from that, Star Publications also managed to record 2.8% yoy earnings growth in 9M14 due to stronger contribution from its event and exhibition segment that offset the weakness in print. Meanwhile, both Media Prima and Media Chinese shared the position as the worst performer in the sector, with a 30.1% and 30% drop in 9M14 earnings. Overall, 2014 was a challenging year for the sector given the uncertainty in the domestic economy and particularly due to the pending implementation of the Goods & Service Tax (GST) in Apr 15.
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Figure 4: Astro revenue +10%, core net profit +12.7% Figure 5: Star revenue -0.4%, core net profit +2.8%
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SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
Figure 6: Media Prima revenue -11.7%, core net profit -30.1% Figure 7: Media Chinese revenue -6.9%, core net profit -27.8%
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SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
Rise in discounting across multiple platforms
The official advertising expenditure data by Nielsen highlighted that 9M14 adex grew by 8.2% yoy due to a stronger contribution from the pay-TV segment. While we think the data are not reflective of the real industry environment, it does imply that a higher discount rate was given by media companies during the period. For example, we estimate that on average, the industry has raised the adex discounting factor by 5% pts from 66% in 9M13 to 71% in 9M14. Meanwhile, major traditional platforms such as print showed an additional 10% pts of adex discounts from 40% in 9M13 to 50% in 9M14.
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Figure 8: Malaysian adex
9M13 Adex (RM m) 9M14 Adex (RM m) yoy growth (%)9M13 Market
Share (%)
9M14 Market
Share(%)
Television FTA 2,242 2,386 6.4 23 23
Pay TV 3,394 3,910 15.2 35 38
Newspapers 3,324 3,530 6.2 35 34
Magazines 92 90 -2.3 1 1
Radio 337 340 1.0 4 3
Cinema 25 32 29.2 0 0
Outdoor 96 - n.m. 1 0
In-store media 99 113 14.1 1 1
Total 9,609 10,401 8.2 100 100 SOURCES: CIMB, NIELSEN
Figure 9: 2013 adex from Astro, MCIL, MPR, Star & Utusan
(RM m) 9M13 9M14 Growth (%)
Astro* 425 440 3.5
MCIL 713 644 (9.7)
Media Prima 1,271 1,122 (11.7)
Star 597 572 (4.2)
Utusan 253 215 (15.0)
Total 3,259 2,993 (8.2)
Total Adex from Nielsen 9,609 10,401 8.2
Average discounting 66% 71% +5% pts
Average discounting ex-pay-TV 54% 61% +7% pts SOURCES: CIMB, COMPANY REPORTS
*Astro denotes 9MFY15 adex (reflect Feb-Oct period for 2013 and 2014)
Persistent decline in print circulation
According to the latest data by the Audit Bureau of Circulations Malaysia, total newspaper circulation volumes in 1H14 fell by 10.9% yoy and 4.4% hoh for both vernacular and English newspaper segments. This is attributable to a normalising effect following the election year in 2013, a structural shift towards digital and persistent weakness in consumer sentiment. Despite the ongoing decline in print circulation, Star managed to buck the trend and recorded 0.6% and 0.3% yoy growth for its “The Star” and “Sunday Star” newspapers, respectively. We believe this is mainly due to its strong position as the market leader in the English segment and higher share of adex. Meanwhile, Star also continues to dominate the digital paper segment with a strong leading position of over 80k daily circulation compared to 3k for the New Strait Times. Overall, we expect the declining trend in print circulation to continue due to the rising consumer exposure to online and digital platforms.
Figure 10: Newspaper adex by segment
2011 2012 2013 11M14 2011 2012 2013 11M14
Malay 1,355 1,379 1,380 1,231 33 34 32 31
Chinese 1,159 1,163 1,225 1,087 28 29 29 27
English 1,556 1,462 1,671 1,694 38 37 39 42
Total 4,070 4,004 4,276 4,012 100 100 100 100
Adex (RM m) Adex market share
SOURCES: CIMB, COMPANY REPORTS
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Figure 11: Daily newspaper circulation by segment Figure 12: Daily digital paper circulation by title
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SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
2014 share price performances
The Malaysian media sector recorded a 5% decline in market value in 2014, inline with the 5.6% decline in the KLCI Index. The sector maintained steady growth throughout the year, except at the end of 4Q14, which coincided with the broader market selldown.
Star Publications was the best performer in the sector, with 4% share price growth on the back of stronger earnings contribution from its event segment. Meanwhile, Astro came in second with 1% growth in share prices, reversing most of its gains in 2014 following weaker subs addition in 3QFY15. On the other hand, Media Prima was the least-performing stock in the sector with a 33% decline in share prices, mainly due to the poor earnings performance across its key main platforms during the year. Apart from that, Media Chinese International also suffered a 23% decline in its share price performance in 2014 due to weakening print adex and lower contribution from its travel segment.
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Figure 15: Malaysian media companies share price performance
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SOURCES: CIMB, COMPANY REPORTS
OUTLOOK FOR 2015
Mixed growth prospects
2015 could be another challenging year for the media sector given the persistent weakness in consumer sentiment on the back of the pending GST implementation. Apart from that, the recent fuel price drop by the government may have a minimal impact on consumer spending given the uncertainty in the domestic economy. We see minimal adex spending from advertisers in 1H15 as consumer confidence is expected to stay low. Nevertheless, we also see advertisers planning for promotions in 1Q15 to entice consumer spending ahead of the GST implementation in Apr, but expect pullback following that, and only a return to advertising once the anxiety over GST subsides later in 2H15.
Overall, we expect the Malaysian media sector to record 5% growth in 2015, tracking our in-house domestic GDP growth forecast of 5%. Meanwhile, we expect companies in our coverage to record mixed prospects of 1-7% revenue growth in 2015, with Astro continuing to lead the sector on the back of resilient earnings growth and a defensive operating model.
Figure 16: Projected revenue growth in 2015
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SOURCES: CIMB, COMPANY REPORTS
Adex spending still trailing behind regional countries
According to data prepared by GroupM, Malaysia is still trailing behind most developed nations in terms of adex spending to GDP ratio. Malaysia’s adex share is estimated to be at 0.56%, which is far below the global average of 0.72%.
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Meanwhile, other leading Asia Pacific countries such as China (0.74%), Japan (0.89%), South Korea (0.74%) and Hong Kong (2.66%) recorded a higher adex to GDP ratio compared to Malaysia, with the exception of Singapore (0.54%).
Across ASEAN, countries like the Philippines (1.0%), Thailand (0.79%) and Vietnam (0.8%) have a better adex spending ratio than Malaysia. Overall, we see this as a structural challenge facing the local industry, partly due to the lack of belief in brand and product marketing. We believe that as Malaysia progressively transforms into a service-based economy nation, adex investment or spending could be a major segment to drive the country.
Figure 17: Adex spending to GDP percentage ratio by country
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0 0.2 0.4 0.6 0.8 1 1.2
Malaysia
Singapore
China
Japan
South Korea
Philippines
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Canada
SOURCES: CIMB, COMPANY REPORTS
Traditional platforms are moving away from print
According to PwC Global Entertainment and Media Outlook 2013-2017, Malaysian adex revenue is expected to grow by a CAGR of 4.6% with limited changes in the total adex mix. Traditional print and TV segments are expected to stay dominant despite weakening market share from 84% pts to 81% pts over the period, while internet advertising is expected to record the fastest growth at a CAGR of 15.9% over 2013-17 and become the third-largest segment by 2017.
Figure 18: Malaysia’s adex spending forecast by segment
49%
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SOURCES: CIMB, PwC
However, within the traditional platforms, the TV segment is still expected to gain more market share from the print segment due to the ongoing migration to digital. This is highlighted by data from a leading global media ad buyer, GroupM, which showed that the print segment adex market share in Malaysia fell from 61% pts in 2006 to 49% in 2014, while TV adex market share actually grew from 15% pts to 26% over the same period.
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Figure 19: Malaysian adex trend from 2006 to 2014
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We are not surprised by this because the majority of adex revenue in Malaysia is controlled by the top five media players (Astro, MCIL, Media Prima, Star and Utusan) that have large exposure to traditional platforms. We see that the slow migration towards digital platforms in the Malaysian market is partly due to the potential negative earnings impact from online dilution given that we estimate up to 80% potential digital dilution. For example, for every RM1 of print adex revenue, only RM0.20 would migrate to digital revenue; thus highlighting the potential negative dilution for media companies’ earnings.
A structural shift to digital media is underway
Despite the dominant position of traditional platforms, we believe the sector is facing a structural shift in adex dollars towards digital and online media. This is mainly due to the rising popularity of online platforms and social media players such as “Youtube” and “Facebook” that are offering free content to large audiences with lower advertising rates compared to traditional media players.
According to a survey carried out by the Malaysian Communication and Multimedia Commission (MCMC), 72.1% of Malaysian internet users are below 35 years old. This means that advertisers need to invest in multi-platform content delivery, in order to capture a bigger population over the next 5-10 years. In other words, this highlights the importance of having a strong online platform.
Figure 20: Malaysian internet user by age group
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In addition, we are also seeing a gradual shift in TV consumption towards online videos, with 6.8m out of 18m TV viewers having exposure to online video platforms. The rising online video consumption is partly due to the increasing popularity of online portals such as “Youtube” and “Tonton” online. Media owners like Media Prima are expected to benefit from the industry trend, given its strength in domestic content creation, coupled with popular online platforms such as “Tonton”, an online catch-up TV service that captured over 4m registered members. Although the current adex rates for online platforms are relatively low compared to TV and print, we see the gap narrowing due to the increasing popularity of online and digital media among Malaysian consumers.
Furthermore, rising internet penetration among the younger generation indicates the potential for more online retail platforms to capture the demand from these segments. We see Astro as the potential beneficiary of the trend following its venture into the home-shopping business. This is a new growth driver for the company, aiming to capitalise on the shift to digital and online platforms, given that its home-shopping service will be available through both pay-TV and mobile applications.
Figure 21: Shift in TV consumption online video Figure 22: Smart devices usage is closing the gap with TV
Separately, another set of data from Nielsen also highlighted the similar trend in Malaysian consumers’ shift towards digital media. According to the Nielsen survey, an average Malaysian household spent about nine hours per day across four main media platforms - TV, online, newspaper and radio. The survey highlighted that the TV segment remains the dominant platform in the average Malaysian household. However, an interesting takeaway from the survey was that the online segment came in as the second-most utilised platform, ahead of the radio and newspaper segments. Malaysian households spend about 2.5 hours online compared to two hours listening to the radio and 0.5 hours reading newspapers daily. This showed that the online platform is fast becoming an important source of information, news and entertainment for domestic consumers. Overall, the survey results indicate that the online platform is gaining popularity among Malaysian consumers and we believe that this illustrates an attractive growth prospect in digital platforms.
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Figure 23: Survey of Malaysian households’ hours spent per day
SOURCE: CIMB, NIELSEN, 4As
Astro is the pay-TV market leader
Malaysia’s pay-tv market has enjoyed steady growth over the years, partly due to limited competitive pressure and the strong market leader, Astro. In Malaysia, the pay-TV market is expanding in terms of diversifying TV packages and programme offerings. For example, media owners are partnering with telecommunication service providers to provide bundling services consisting of broadband, pay-TV and phone packages. These service providers are providing an avenue for an increasingly rich entertainment environment and taking advantage of digital media.
Apart from that, the sector is gradually embracing content sharing strategies to leverage each other’s strengths. For example, Astro has successfully monetised its Barclays Premier League (BPL) content by sharing the rights with Telekom Malaysia’s IPTV service, HyppTV. This helps Astro to generate new revenue streams, while HyppTV service subscribers can enjoy two Astro SuperSport channels. In terms of competitive landscape, we see minimal concerns over potential new players in the pay-TV market, partly due to the lack of transmission capacity for Malaysia, highly expensive set-up costs and lack of quality content ownership.
We expect Astro to maintain its position as the market leader and continuously grow its penetration rate from 62% currently (3.5m pay-TV subs and 800k NJOI prepaid customers) due to its strong content ownership and the sticky nature of its subscribers. Despite the recent weakness in consumer sentiment and new subs addition, the company is still confident of achieving its 80% Malaysian household penetration target by 2017, driven by robust growth from NJOI prepaid services and upward ARPU revision.
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Figure 24: Astro pay TV and NJOI household penetration
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TV household Astro Pay-TV household (include NJOI) Penetration rate (%)
SOURCES: CIMB, COMPANY REPORTS
With the limited greenfield subs opportunity, we believe that ARPU growth is the next major driver for Astro. The company has successfully increased its ARPU from RM85 in FY11 to RM96 in FY14 on the back of rising premium content cost and better package offerings. However, it is interesting to note that Astro’s churn rate has been relatively stable and hovered below 10% throughout the period. This highlights the strength of Astro’s strategy to retain its subscribers. For example, in Nov 13, Astro raised its Family Pack by RM2/mth and Sports Pack by RM6/mth. Simultaneously, Astro would offer subscribers an exclusive preview of 12 new high-definition (HD) and two standard-definition (SD) channels over the next three months. The strategy has successfully reduced the churn rate of its subscribers.
SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
Potential impact from digital TV switchover
The privately-owned Puncak Semangat was awarded a 15-year concession by the Malaysian Communication and Multimedia Commission to develop the digital terrestrial television broadcast (DTTB) service in Jan 14 as part of the government’s transformation initiatives to fully digitise free-to-air stations in the country and optimise the use of the prized spectrum. Puncak Semangat will become the common integrated infrastructure provider (CIIP) and be responsible for setting up a digital multimedia hub and a network of high, medium and low powered digital TV transmitters nationwide that will have the technical capability to carry up to 45 standard definition (SD) or 15 high
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definition (HD) digital channels initially. For a start, the digital migration will be carried out for government-owned and private stations, namely TV1, TV2, TV3, ntv7, 8TV, TV9, TV Al-Hijrah and Bernama TV. We understand that the implementation is slated to be done in four phases starting in mid-2015.
Under this project, FTA-TV broadcasters such as Media Prima will have to move from their existing analogue platform to a fully digital platform. A recent article from The Edge highlighted that MYTV Broadcasting Sdn Bhd, the operating company carrying the DTTB project, is planning to set a transmission fee of RM12.5m and RM25m for standard definition (SD) or high-definition (HD) channels running on its digital platform.
We understand that this will be significantly higher than what is currently paid by Media Prima, which was reported at RM43m in 2013 for four TV channels and three radio stations. Therefore, we think this will be negative for existing FTA-TV players like Media Prima given that it could incur higher transmission costs and potential competition from new entrants. We understand that Star Publications has been offered up to three channels to operate on the new digital platform and it has already carried out TV operations under the Li TV channel. Although the digital platform would allow more TV channels to become available for consumers, we do not expect TV adex to grow substantially given the moderate growth in the domestic economy.
Relevant content is very important
In addition, we see that compelling content is a very important tool to attract audiences and encourage viewer loyalty. We think that having both international and localised content is essential to maintain audiences’ diverse needs and better choices for content. Hence, we think that TV players such as Astro and Media Prima have a better advantage due to their strength in content production and ownership relative to print players because the content could be monetised over a long period of time. Moreover, this content ownership helps to create stickiness with viewers and reduce subs churn rate for the pay-TV service provider.
Figure 27: Content production highlights
Astro
1) Invested RM1.2bn in 50,000 hours of self-produces content since the company's inception on 1996.
2) Localised international content where approximately 28,000 hours of programming were dubbed and subtitled
to enhance customer experience in 2013.
3) Produces 10,000 hours of local contents in 2013.
Media Prima
1) Primework Studios, the content creation subsidiary of Media Prima produced more than 5,000 hours of
dramasm documentaries and shows a year. In 2013, more than 1,900 hours of local content was produced for
TV3 channel alone.
2) Spend approximately RM200m a year in local contents for the nation;s broad and diverse demographics.
3) A number of novel-adapted TV dramas such as "Teduhan Kasih" and "Love You Mr Arrogant" gained popular
response in 2013 with 11m viewers over the primetime Akasia segment via TV3 channel. SOURCES: CIMB, MCMC Industry Performance Report 2013
RISKS
Reversal in newsprint prices
We expect the newsprint price to remain low due to excess global capacity and declining industry demand. While some of the major global newsprint producers like Resolute Forest (RFP US, Not Rated) are closing down mills to reduce its capacity in view of the declining newsprint prices, we see that this is not enough to counter the global demand slowdown. The Pulp and Paper Products Council (PPPC) reported that global newsprint and magazine paper demand fell by 7% and 3%, respectively, in 9M14. Global newsprint cost fell by 3.1% in 2014 from US$585 per tonne to US$567 per tonne as at end-2014. This should benefit the print media players due to the lower direct cost for newsprint. However, we think the positive impact may be diluted from a weaker ringgit given that newsprint costs are denominated in US dollar.
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Impact of a stronger US dollar
Another potential risk for the media sector is the further strengthening of the US dollar against the ringgit. The ringgit fell by 6.2% in 2014. A lower ringgit could have an impact on media companies, especially print players, due to the dollar-denominated newsprint cost. We expect print companies to incur high direct cost given the strengthening US dollar. Apart from that, major content buyers like Astro and Media Prima could also incur higher content cost. For Astro, we understand that management has exercised a hedging policy to mitigate the risk given its large content cost exposure in US dollar. Meanwhile for Media Prima, it does not have a hedging policy for content cost, but we think the impact will be minimal given that the majority of the content cost is attributable to local production.
Figure 28: Declining newsprint prices Figure 29: Weakening of ringgit relative to US$
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SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
COMPANIES’ STRATEGIES FOR 2015
We expect tepid growth for the media sector in 2015, especially for companies with wider exposure to traditional platforms such as print, given the ongoing weakness in consumer sentiment and the shift to digital platforms. Nevertheless, we expect companies like Media Prima and Star Publications to benefit from the cost savings initiatives carried out in 2014. Meanwhile, we think MCIL will continue to struggle due to its high dependency on print segment. We still prefer Astro for its comparatively lesser reliance on the adex market and its defensive operating model with over 4.2m subscribers.
Astro Malaysia Holdings
Astro’s management remains bullish on its growth prospect and reiterated its commitment to reach 80% Malaysian household penetration by 2018, driven by NJOI prepaid service and maintaining its strong growth in content monetisation strategy, by selling sports or vernacular content rights to domestic as well as neighbouring markets. Moreover, we believe Astro will continue to leverage on its position as the pay-TV market leader with a dominant subscriber base of 4.2m Malaysian households. The company has recently implemented a RM5 price revision for the HD subscription fee from RM20/mth to RM25/mth, a year after the Super Pack and Sports Pack price revision. We see the recent price hike as a strategy to cushion the potential negative impact from weak consumer sentiment. We also think the recently launched home-shopping channel will help Astro to diversify its earnings beyond subscription revenue.
Media - overall│Malaysia
January 26, 2015
15
Media Chinese International (MCIL)
MCIL’s management is bearish on the group’s growth prospects, given the uncertainty in the domestic economy and weakening adex in the Chinese market. We see its high dependency on print segment and strong competition from online media as hurting MCIL’s profitability. Nevertheless, in an attempt to transform itself into a relevant digital player, MCIL has recently launched its e-commerce platform, “Logon”, to help small and medium enterprises establish an online presence and leverage on its 2.5m Chinese readers. However, we think this will be a challenging process, given its lack of experience in e-commerce and strong competition from other online portals. Apart from that, the company is also exploring the education segment following its maiden textbook printing venture in Hong Kong last year.
Media Prima
Media Prima’s management is cautiously optimistic with the group’s growth prospects in 2015 driven by a potential recovery in adex post-GST implementation in 2H15 and improving operating efficiency. The company had completed its restructuring exercise following the voluntary separation scheme exercise in Dec-14. In addition, we think the recent surprise announcement on the cover price for its Malay and English newspapers should bring an immediate, but small boost to earnings. However, we believe a key issue is a potential rise in operating costs from higher transmission fees from digital switchover for its TV operations. However any potential monetisation of its digital asset, Tonton online could be a positive surprise for the market, in our view.
Star Publications
Star Publications’ management is optimistic about its earnings prospect given its stronger position in the non-print segment, better cost management and stabilising contribution from its print segment. Management believes it has benefited from a returning readership base following the steep decline during the last General Election. Meanwhile, we like Star’s strategy of embracing the digital platform as its e-paper circulation continues to rise strongly and its digital assets continue to gain traction, especially in the property vertical following a revamp of its Star Property and iBilik room rental portals. Moreover, we think Star could follow Media Prima’s decision on the newspaper cover price hike following the GST implementation to address its rising operating cost issue. Management is also looking to diversify its exposure into TV operations, following the introduction of new channels from its digital TV switchover initiatives.
VALUATION AND RECOMMENDATION
We maintain Neutral on the sector
The sector currently trades 18.3x CY15 P/E, which is more than 2 s.d. below the sector historical mean of 22.6x. However, we think this is mainly due to the recent weakness in Astro’s share prices, given its large weightings in the sector. If we exclude Astro, the sector actually trades at 11x CY15 P/E, which is within 1 s.d. of the historical mean of 12.7x, which we think reflects the tepid adex outlook on the back of weak consumer sentiment following the GST implementation. While adex spending in 2014 was negatively impacted by the unfortunate tragedy of MH370, MH17 and QZ8501, we expect to see a moderate adex recovery in 2015 due to a lack of major events, aside from government tourism initiatives for the Malaysia Year of Festival 2015 (MyFest 2015) campaign, which is likely to boost consumer spending and attract advertisers. Thus, we maintain our Neutral stance on the Malaysian media sector.
Media - overall│Malaysia
January 26, 2015
16
Figure 30: Media sector P/E (ex-Astro) Figure 31: Media sector P/BV (ex-Astro)
Astro is the only stock with an Add call within our media sector. Astro is expected to maintain its position as the dominant pay-TV operator in the market with resilient growth from strong content monetisation, better package offerings and less reliance on the volatile adex market. We also maintain our Hold ratings for the remaining stocks in our coverage, namely MCIL, Media Prima and Star due to their attractive yield offering and strong free cashflow generation, despite their lacklustre earnings performance.
Stock selection is key
We believe that Astro could be the least impacted by the upcoming GST implementation due to its defensive operating model and less reliance on adex. Despite this, we see Astro as the only company to record strong growth in the coming years. Therefore, Astro deserves the premium relative to other media peers.
Figure 32: Media sector revenue forecast Figure 33: Media sector earnings forecast
-
2,000
4,000
6,000
8,000
10,000
12,000
2013 2014F 2015F
(RM m)
Other media - (MCIL, Media Prima & Star) Astro
-
200
400
600
800
1,000
1,200
2013 2014F 2015F
(RM m)
Other media - (MCIL, Media Prima & Star) Astro
SOURCE: CIMB RESEARCH, COMPANY SOURCE: CIMB RESEARCH, COMPANY
TV - Satellite│Malaysia
January 26, 2015
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Poised for growth Astro is expected to leverage its position as the dominant pay-TV operator in Malaysia. We project stronger earnings contributions from FY15 onwards due to higher ARPU growth from value-added services, rising subscriber numbers and better content monetisation.
We maintain our Add rating on the stock and our DCF-based target price of RM3.80 (WACC: 8%). We see strong earnings growth with 2013-16 CAGR of 19.5% on the back of higher ARPU growth, a rising subscriber base from NJOI and its pay TV service, and the convergence of media platforms as potential catalysts. Astro is our top pick for the media sector.
9MFY15 review Revenue in 9MFY15 grew by 10% yoy, driven by a 2.3% increase in pay-TV subscribers from 3.40m to 3.48m and higher ARPU growth of 3% from RM95.6 to RM98.5. Despite having recorded a higher effective tax rate of 27.6% vs 24%, Astro’s 9MFY15 core net profit grew by 12.7% yoy from RM337m to RM379m driven by higher ARPU and subs additional and licensing income contribution.
New driver in home shopping Astro launched its first home shopping channel as part of its strategy to leverage the 4.2m households on its pay-TV platform. The company had also formed a partnership with a Korean company, GS Home Shopping, to help it grow
the service in Malaysia. Home shopping will be a new revenue driver for Astro and management is targeting a RM500m annual revenue contribution within the next 4-5 years. We estimate that the new segment could add 3-4% to revenue in FY16-17.
Better content monetisation strategy The company projects further growth from content monetisation through licensees’ fees and selling channels to regional markets. The success of its content monetisation strategy is partly demonstrated by the strong growth in other services revenue, which grew from RM137m in 9MFY14 to RM241m in 9MFY15.
Stay resilient We see the recent HD fees revision from RM20 to RM25/month as earnings accretive for the company, and expect minimal churn impact from its subscribers due to Astro’s defensive operating model and sticky nature of its subscribers. As a matter of fact, Astro’s annual subscriber numbers have been increasing despite the many rounds of price hikes in the past.
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Structural challenge remains MCIL’s ventures into e-commerce help to diversify its exposure into the digital segment and address its high dependence on print. However, the new division would require a longer gestation period amid fierce market competition and its limited experience in e-commerce trading.
We maintain our Hold rating with a lower RM0.72 target price, based on 9x CY16 P/E, still at a 40% discount to our revised target market P/E of 15x. We expect advertising spending to stay weak ahead of the GST implementation and only recover in 2H15 as concerns subside. Switch to Astro for exposure in the media sector.
Print circulation continues to decline The Audit of Bureau Circulation Malaysia reported that the Chinese paper circulation continues to decline by 6% yoy in 1H14. We expect this falling trend to continue due to changes in readership preference for social media, especially among the younger generation.
Education segment to gain traction MCIL started to supply junior and senior secondary schools with the “Life & Society” and “Liberal Studies” printed and e-textbooks in 2H14. The company expects to win more new contracts to supply textbooks in the same subjects for different grades. Management is guiding for annual sales contributions of HK$10m-30m from this new segment.
E-commerce venture will require more time The company had recently launched its e-commerce platform, “Logon” to help small- and medium-sized enterprises (SME) establish their online presence and capitalise on the company’s sizeable Malaysian Chinese readership of 2.5m. The company also officially launched its online video portal, “Pocketimes” as a new venture onto digital advertising. MCIL expects to generate revenue of RM8m-10m in FY15 and RM20m-30m in FY17. While we like its strategy of diversifying beyond print, it will need a longer gestation period given the competitive nature of the online platform and its high dependence on the print segment which contributes about 80% of the group’s revenue.
Staying prudent Although the group’s gearing level has fallen to 17.1% from 47% after the special dividend payment in 2012, management remains conservative with its cash management in view of the challenging operating outlook and potentially lower earnings contribution. Thus, MCIL could lower its dividend payout to 40-50% in FY15 (vs. 30-60% previously).
Fully Diluted Recurring Net Profit 158 128 133 136
Balance Sheet
(RMm) Mar-14A Mar-15F Mar-16F Mar-17F
Total Cash And Equivalents 335.9 347.4 390.4 438.8
Total Debtors 221.3 221.3 221.3 221.3
Inventories 171.1 171.1 171.1 171.1
Total Other Current Assets 3.3 3.3 3.3 3.3
Total Current Assets 731.6 743.1 786.2 834.5
Fixed Assets 471.2 471.2 471.2 471.2
Total Investments 56.0 56.0 56.0 56.0
Intangible Assets 238.1 238.1 238.1 238.1
Total Other Non-Current Assets 14.4 6.6 6.6 6.6
Total Non-current Assets 779.7 772.0 772.0 772.0
Short-term Debt 41.6 41.6 41.6 41.6
Current Portion of Long-Term Debt
Total Creditors 224.5 224.5 224.5 224.5
Other Current Liabilities 17.8 10.0 28.6 37.8
Total Current Liabilities 283.8 276.1 294.6 303.8
Total Long-term Debt 450.0 380.0 340.0 320.0
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities 42.6 42.6 42.6 42.6
Total Non-current Liabilities 492.6 422.6 382.6 362.6
Total Provisions 0.0 0.0 0.0 0.0
Total Liabilities 776.4 698.7 677.2 666.4
Shareholders' Equity 711.3 788.0 847.8 902.1
Minority Interests 23.6 28.3 33.1 37.9
Total Equity 734.9 816.4 880.9 940.1
Cash Flow
(RMm) Mar-14A Mar-15F Mar-16F Mar-17F
EBITDA 283.2 238.2 245.5 250.4
Cash Flow from Invt. & Assoc.
Change In Working Capital (34.7) (34.7) (34.7) (34.7)
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow 0.5 1.2 2.3 0.0
Net Interest (Paid)/Received (23.1) (26.6) (26.6) (26.6)
Tax Paid (66.8) (44.2) (45.9) (46.9)
Cashflow From Operations 159.2 133.9 140.7 142.2
Capex (35.3) (40.0) (40.0) (40.0)
Disposals Of FAs/subsidiaries 0.0 0.0 0.0 0.0
Acq. Of Subsidiaries/investments 0.0 0.0 0.0 0.0
Other Investing Cashflow 4.2 0.0 0.0 0.0
Cash Flow From Investing (31.1) (40.0) (40.0) (40.0)
Debt Raised/(repaid) 0.0 0.0 0.0 0.0
Proceeds From Issue Of Shares 0.0 0.0 0.0 0.0
Shares Repurchased 0.0 0.0 0.0 0.0
Dividends Paid (97.2) (97.2) (97.2) (97.2)
Preferred Dividends
Other Financing Cashflow 0.0 0.0 0.0 0.0
Cash Flow From Financing (97.2) (97.2) (97.2) (97.2)
Total Cash Generated 30.9 (3.4) 3.4 5.0
Free Cashflow To Equity 128.1 93.9 100.7 102.2
Free Cashflow To Firm 151.2 120.5 127.3 128.9
Key Ratios
Mar-14A Mar-15F Mar-16F Mar-17F
Revenue Growth (1.91%) (0.50%) 2.00% 2.00%
Operating EBITDA Growth (3.3%) (15.9%) 3.1% 2.0%
Operating EBITDA Margin 18.5% 15.6% 15.8% 15.8%
Net Cash Per Share (RM) (0.09) (0.04) 0.01 0.05
BVPS (RM) 0.42 0.47 0.50 0.53
Gross Interest Cover 9.25 7.53 7.78 7.94
Effective Tax Rate 28.1% 25.0% 25.0% 25.0%
Net Dividend Payout Ratio 62% 40% 55% 60%
Accounts Receivables Days 55.47 53.04 52.15 50.99
Inventory Days N/A N/A N/A N/A
Accounts Payables Days N/A N/A N/A N/A
ROIC (%) 27.0% 22.9% 23.6% 24.6%
ROCE (%) 20.3% 16.7% 17.0% 16.9%
Key Drivers
Mar-14A Mar-15F Mar-16F Mar-17F
TV Adex Rate (% Change) N/A N/A N/A N/A
Average Utilisation Rate (%) N/A N/A N/A N/A
Prime Time Utilisation Rate (%) N/A N/A N/A N/A
Non Prime Time Utilisation Rate (%) N/A N/A N/A N/A
Programming Costs (% Change) N/A N/A N/A N/A
Newsppr adex rev. grth (%) 1.0% 1.0% 1.0% 1.0%
Newspaper ASP (% Change) N/A N/A N/A N/A
Newsppr circulation grth (%) 3.0% 3.0% 3.0% 3.0%
Newsprint Cost (% Change) N/A N/A N/A N/A
SOURCE: CIMB, COMPANY REPORTS
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
12-month Forward Rolling FD P/E (x)
Astro Malaysia Media Chinese Int'l
Media Prima Bhd Star Publications
Media - Integrated│Malaysia
January 26, 2015
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Still in the woods While we like Media Prima for its exposure across multiple platforms and its dominant position in the free-to-air (FTA) TV segment, we believe the company’s dependency on traditional platforms is affecting its profitability, due to weak adex and the shift to digital platforms.
We largely maintain our FY14-16 EPS forecast and Hold rating on the stock with an unchanged RM1.80 target price, based on 9.8x CY16 P/E, which is still a 35% discount to our target market P/E of 15x. While the stock offers an attractive FY15 yield of 6.8%, we prefer Astro for better exposure to the sector.
Newsprint price hike helps to bolster weakening print Media Prima raised the cover prices of its Malay and English newspapers by 11-33% with effect from 1 Jan 15. “Berita Harian’s” and “Harian Metro’s” (HM) cover prices were increased by 30 sen from RM1.50 to RM1.80 for West Malaysia, while the cover price of HM was raised by 50 sen for East Malaysia. Meanwhile, “New Straits Times” cover price was also raised by 30 sen to RM1.50 from RM1.20 for West Malaysia and by 20 sen for East Malaysia.
MSS exercise completed The company completed a mutual separation scheme (MSS) for its employees in 4Q14, as part of cost-saving initiatives to improve the group’s operating efficiency and profitability. Management highlighted that it had achieved the 10%
headcount reduction as per guidance and expects a one-time cost of RM60m-80m. We estimate this could lead to annual savings of about RM45m or 3% of its operating cost.
Monetisation of Tonton will take time Media Prima is still in the midst of launching its subscription-based online service, dubbed Tonton Premium as part of its strategy to capitalise on its 4m registered members. However, this could be a slow and challenging process, given stiff competition from other online platforms such as Youtube, which is offering free content. Apart from that, we think the lack of premium content is also preventing them from launching the subscription service.
Adex recovery post-GST Overall, we expect adex spending to recover in 2H15, assuming consumer spending returns as anxiety over Goods and Service Tax (GST) implementation subsides. However, the print segment is still expected to continue declining due to the structural shift in adex to digital platform.
Depreciation And Amortisation (105) (104) (104) (104)
Operating EBIT 301 199 228 253
Financial Income/(Expense) (11) 10 15 20
Pretax Income/(Loss) from Assoc. 0 0 0 0
Non-Operating Income/(Expense) 0 0 0 0
Profit Before Tax (pre-EI) 290 209 242 273
Exceptional Items
Pre-tax Profit 290 209 242 273
Taxation (74) (52) (61) (68)
Exceptional Income - post-tax
Profit After Tax 216 157 182 205
Minority Interests (2) (2) (2) (2)
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit 214 155 180 202
Recurring Net Profit 214 155 180 202
Fully Diluted Recurring Net Profit 214 155 180 202
Balance Sheet
(RMm) Dec-13A Dec-14F Dec-15F Dec-16F
Total Cash And Equivalents 618 706 765 831
Total Debtors 386 356 365 374
Inventories 118 109 111 114
Total Other Current Assets 24 23 23 23
Total Current Assets 1,146 1,194 1,265 1,343
Fixed Assets 758 758 758 758
Total Investments 231 231 231 231
Intangible Assets 384 384 384 384
Total Other Non-Current Assets 88 88 88 88
Total Non-current Assets 1,461 1,461 1,461 1,461
Short-term Debt 48 48 48 48
Current Portion of Long-Term Debt
Total Creditors 364 336 344 353
Other Current Liabilities 0 0 0 0
Total Current Liabilities 412 384 392 401
Total Long-term Debt 452 452 452 452
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities 0 0 0 0
Total Non-current Liabilities 452 452 452 452
Total Provisions 66 79 95 112
Total Liabilities 930 915 938 964
Shareholders' Equity 1,656 1,718 1,763 1,814
Minority Interests 20 22 23 26
Total Equity 1,676 1,740 1,787 1,840
Cash Flow
(RMm) Dec-13A Dec-14F Dec-15F Dec-16F
EBITDA 405.7 302.8 331.6 356.7
Cash Flow from Invt. & Assoc.
Change In Working Capital 35.4 10.9 (3.2) (3.3)
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow
Net Interest (Paid)/Received (10.9) 10.2 14.6 20.0
Tax Paid (55.2) (39.2) (45.4) (51.1)
Cashflow From Operations 374.9 284.6 297.6 322.3
Capex (103.5) (100.0) (100.0) (100.0)
Disposals Of FAs/subsidiaries 0.0 0.0 0.0 0.0
Acq. Of Subsidiaries/investments
Other Investing Cashflow 29.0 31.1 34.6 37.5
Cash Flow From Investing (74.4) (68.9) (65.4) (62.5)
Debt Raised/(repaid) (26.3) (21.0) (20.0) (17.5)
Proceeds From Issue Of Shares 0.0 0.0 0.0 0.0
Shares Repurchased
Dividends Paid (182.0) (93.1) (134.9) (151.9)
Preferred Dividends
Other Financing Cashflow 0.0 0.0 0.0 0.0
Cash Flow From Financing (208.3) (114.0) (154.8) (169.3)
Total Cash Generated 92.2 101.7 77.3 90.5
Free Cashflow To Equity 274.2 194.8 212.2 242.3
Free Cashflow To Firm 326.7 236.7 252.1 277.3
Key Ratios
Dec-13A Dec-14F Dec-15F Dec-16F
Revenue Growth 1.48% (7.78%) 2.46% 2.50%
Operating EBITDA Growth (0.5%) (25.4%) 9.5% 7.6%
Operating EBITDA Margin 23.5% 19.1% 20.4% 21.4%
Net Cash Per Share (RM) 0.11 0.19 0.24 0.30
BVPS (RM) 1.51 1.56 1.60 1.65
Gross Interest Cover 11.46 9.48 11.40 14.46
Effective Tax Rate 25.4% 25.0% 25.0% 25.0%
Net Dividend Payout Ratio 85.0% 60.0% 75.0% 75.0%
Accounts Receivables Days 87.00 85.23 80.80 81.00
Inventory Days N/A N/A N/A N/A
Accounts Payables Days N/A N/A N/A N/A
ROIC (%) 15.4% 10.3% 11.9% 13.1%
ROCE (%) 14.4% 10.1% 11.2% 12.0%
Key Drivers
Dec-13A Dec-14F Dec-15F Dec-16F
TV Adex Rate (% Change) 0.2% 3.5% 5.0% 5.5%
Average Utilisation Rate (%) N/A N/A N/A N/A
Prime Time Utilisation Rate (%) N/A N/A N/A N/A
Non Prime Time Utilisation Rate (%) N/A N/A N/A N/A
Programming Costs (% Change) N/A N/A N/A N/A
Newsppr adex rev. grth (%) 6.2% 5.0% 4.5% 4.5%
Newspaper ASP (% Change) N/A N/A N/A N/A
Newsppr circulation grth (%) N/A N/A N/A N/A
Newsprint Cost (% Change) N/A N/A N/A N/A
SOURCE: CIMB, COMPANY REPORTS
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
12-month Forward Rolling FD P/E (x)
Astro Malaysia Media Chinese Int'l
Media Prima Bhd Star Publications
Newspaper│Malaysia
January 26, 2015
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
In the midst of transition Star is moving in the right direction by focusing on growing its event, TV and broadcasting segments in order to reduce its dependence on print. However, this could be a slow process given the weaker consumer sentiment and strong competition in the digital space.
We raise our FY15-16 EPS by 6-13% in view of stronger contributions from its non-print segment and better operating efficiency following its cost saving initiatives in 2014. Thus, we maintain our Hold rating on the stock with a higher target price of RM2.40, based on 11.3x CY16 P/E, still at a 25% discount to the revised target market P/E of 15x. While the stock offers an attractive 7.2% FY15 yield, we prefer Astro for better exposure to the Malaysian media sector.
Growing the non-print Star plans to grow its non-print segment as part of its strategy to address the decline in print demand. Star expects to gain better traction in the online segment with the revamp of its Star Property and iBilik portals. The group’s property platform is now ranked second in terms of unique visitor behind iProperty in Malaysia. We see attractive growth potential in the property vertical because we estimate that property developers are allocating up to 2-3% of their project GDV towards marketing. Moreover, we see further potential for Star to replicate this strategy in other areas such as automotive and recruitment, to create a stronger digital asset
proposition.
Star’s circulation volume still holding up well Despite the declining trend in print circulation, we see Star’s circulation numbers continuing to hold up well. For example, overall English paper circulation in 1H14 fell by 8.5% yoy, while Star managed to record a 0.6% growth in print circulation and largely maintained its physical print circulation at the 290k level despite print demand weakness. Meanwhile, its e-paper has continued to gain popularity as the latest data from the Audit Bureau of Circulation highlights that Star e-paper’s circulation has grown from 50k in 1H13 to 80k copies in 1H14. Management is guiding for 100k daily e-paper copies for 2014.
Potential newsprint price hike Management recently indicated it is still reviewing the cover prices for its paper following the upward price revision from its competitor at New Straits Times Publications. We think Star could follow the price hike exercise after the implementation of GST in April in order to cushion the impact of rising costs.
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Indonesia PT CIMB Securities Indonesia Financial Services Authority of Indonesia India CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI) Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia Singapore CIMB Research Pte. Ltd. Monetary Authority of Singapore South Korea CIMB Securities Limited, Korea Branch Financial Services Commission and Financial Supervisory Service Taiwan CIMB Securities Limited, Taiwan Branch Financial Supervisory Commission Thailand CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand
(i) As of January 25, 2015, CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:
(a) Astro Malaysia, Media Prima Bhd
(ii) As of January 26, 2015, the analyst(s) who prepared this report, and the associate(s), has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:
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(a) -
The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CIMB may or may not issue regular reports on the subject matter of this report at any frequency and may cease to do so or change the periodicity of reports at any time. CIMB is under no obligation to update this report in the event of a material change to the information contained in this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
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Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.
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This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong).
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The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensat ion is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates.
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This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations.
Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the
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Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB.
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This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR.
As of January 25, 2015, CIMBR does not have a proprietary position in the recommended securities in this report.
CIMB Securities Singapore Pte Ltd and/or CIMB Bank does not make a market on the securities mentioned in the report.
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The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial investment instruments and it is not intended as a solicitation for the purchase of any financial investment instrument.
This publication is strictly confidential and is for private circulation only, and no part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB Korea.
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Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China.
Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS.
CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker and issuer including offering of Derivative Warrants Underlying securities of the following securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may
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be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.
Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result
Description: Excellent Very Good Good N/A
United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.
United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorised and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are persons falling within Article 49 (2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawful ly be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.
Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research.
United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.
CIMB Securities (USA) Inc does not make a market on the securities mentioned in the report.
Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Rating Distribution (%) Investment Banking clients (%)
Add 58.4% 6.0%
Hold 29.4% 4.3%
Reduce 12.2% 1.0%
Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2014
1586 companies under coverage for quarter ended on 31 December 2014
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014. AAV – Very Good, ADVANC – Very Good, AEONTS – not available, AMATA - Good, ANAN – Very Good, AOT – Very Good, AP - Good, ASK – Very Good, ASP – Very Good, BANPU – Very Good , BAY – Very Good , BBL – Very Good, BCH – not available, BCP - Excellent, BEAUTY – Good, BEC - Good, BECL – Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC – Good, BLA – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Good, CENTEL – Very Good, CHG – not available, CK – Very Good, CPALL – not available, CPF – Very Good, CPN - Excellent, DELTA - Very Good, DEMCO – Good, DTAC – Very Good, EA - Good, ECL – not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA - Excellent, HEMRAJ – Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Good, IVL - Excellent, JAS – not available, JUBILE – not available, KAMART – not available, KBANK - Excellent, KCE - Very Good, KGI – Good, KKP – Excellent, KTB - Excellent, KTC – Good, LH - Very Good, LPN – Very Good, M - not available, MAJOR - Good, MAKRO – Good, MBKET – Good, MC – Very Good, MCOT – Very Good, MEGA – Good, MINT - Excellent, OFM – Very Good, OISHI – Good, PS – Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH – Very Good, RATCH – Very Good, ROBINS – Very Good, RS – Very Good, SAMART - Excellent, SAPPE - not available, SAT – Excellent, SAWAD – not available, SC – Excellent, SCB - Excellent, SCBLIF – Good, SCC – Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA – Very Good, STEC - Good, SVI – Very Good, TASCO – Good, TCAP – Very Good, THAI – Very Good, THANI – Very Good, THCOM – Very Good, THRE – not available, THREL – Good, TICON – Good, TISCO - Excellent, TK – Very Good, TMB - Excellent, TOP - Excellent, TRUE – Very Good, TTW – Very Good, TUF - Good, VGI – Very Good, WORK – not available.
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CIMB Recommendation Framework
Stock Ratings Definition:
Add The stock’s total return is expected to exceed 10% over the next 12 months.
Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings Definition:
Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings Definition:
Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months. Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy: expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell : Expected negative total returns of 10% or more over the next 3 months.
