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Positive adex growth for free-to-air TV this year, says CGS-CIMB Research

KUALA LUMPUR: Advertising expenditure (adex) is expected to grow this year as Malaysia's economic reopening has prompted advertisers to spend more, according to CGS-CIMB Research.

Analyst Kamarul Anwar said the higher forecast for adex is based on the 16.2 per cent year-on-year (YoY) jump in free-to-air (FTA) television's adex in the fourth quarter of 2021.

"We see more upside for the medium's adex in 2022. This is because FTA's adex value and share in the overall market reached an all-time high in 2021. At RM3.5 billion, the FTA adex made up 71.2 per cent of the overall market's value," he said in a research note today.

He said advertisers who want to get visibility in news media could buy advertisement slots on online portals for a fraction of the cost of print.

"Thus, there is a lot left in their budgets that advertisers can spend on FTA TV," he said.

CGS-CIMB Research noted that the traditional media's adex market was valued at RM4.9 billion in 2021, according to data aggregated by market research firm Nielsen Malaysia.

"The 2021 ad revenue soared 20.3 per cent YoY to come in just 5.0 per cent shy of 2019's adex market value of RM5.2 billion.

"We find this impressive considering that Malaysia was confined to movement control orders (MCO) for large parts of 2021."

However, the FTA television broadcasting medium drove the traditional adex market's YoY growth in 2021.

CGS-CIMB Research said adex value for all other media continued to see YoY declines, except for the radio, whose adex rose by 10.2 per cent YoY.

Nonetheless, given the medium's 6.5 per cent share of the overall traditional adex market, CGS-CIMB Research said the impact was small.

"FTA TV's recovery came at the expense of the adex market's erstwhile kingpin, the print medium segment."

The research firm said the MCO accelerated the decline in print medium's popularity.

Advertisers are aware of this structural change as more news consumers shift from physical newspapers to electronic news on smart devices.

These included older consumers who have become adept at sharing news – whether verified or otherwise – with their contacts via instant messaging applications.

CGS-CIMB Research has reiterated an Overweight call for the media sector, underpinned by its preference for stocks focusing on visual media and entertainment, namely Media Prima Bhd and  Astro Malaysia Holdings Bhd.

"We expect Media Prima to emerge from a core net loss in 2021 and register YoY earnings per share growth of 18.1 per cent to 43.6 per cent in 2022 and 2023, respectively."

CGS-CIMB Research said catalysts for the sector include ad-spend rising higher than expected and the 15th General Election possibly taking place in 2022, boosting the ad market.

Downside risks include unfavourable socio-economic conditions hampering ad-spend and subscription revenue.

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