KUALA LUMPUR: A reduction in advertising expenditure (adex) by major advertisers impacted by consumer boycotts have led to a steep fall in revenue for media companies.
TA Research said several brands have faced customer boycotts for their "perceived" support of Israel and this have led many brands to either withdraw or scale back their advertising campaigns to avoid further negative exposure.
In its note, it said many big brands have been compelled to withdraw or scale back their advertising campaigns to avoid further negative exposure.
"Companies are redirecting their resources toward crisis management and public relations efforts to protect their brand reputation, further diminishing their advertising expenditure (adex)," it said in a note published on Tuesday.
TA Research said this reduction in adex has significant financial repercussions for Malaysia's largest and leading integrated media company, Media Prima Bhd.
Media Prima's revenue has dropped by 4.7 per cent on a quarter-on-quarter (qoq) basis and a mere growth of 1.1 per cent year-on-year (yoy) based on its latest filing and the trend is apparent across multiple media segments, including television, digital, and print.
"We acknowledge that Media Prima faces significant challenges from market conditions and intense competition from foreign tech giants."
"However, we believe Media Prima's true value lies in OMNIA, which delivers tailored solutions through its professionalism, experience, comprehensive advertising ecosystem, and valuable data," TA Research said.
It added that backed by its three-year business plan, OMNIA is well-positioned to attract more clients through enhanced content and boost sales revenue.
This includes leveraging the upgrade on their digital billboards, which offer improved pricing power.
Media Prima's three-year business plan focuses on three key pillars, content boost, inventory premiumisation, and new revenue stream.
TA Research said these initiatives are expected to make Media Prima stay relevant in the industry and improve sales revenue.
TA Research has revised its financial year 2024/2025/2026 core net profit forecasts by +6.0 per cent/+32.1 per cent/+32.4 per cent due to a slightly better outlook for Media Prima and indications of a recovery in industry adex.
Industry adex was up 22.5 per cent in the fourth quarter of 2023 (4Q23) to RM1.4 billion.
"However, recent data suggests a slight decline (-8.5 per cent QoQ) in the positive momentum, with the latest figures showing RM1.3 billion in 1Q24. Despite this, the current level remains at the higher end of the historical range over the past five years, with the mean at RM1.2 billion," it said.
TA Research has a sell call on Media Prime with a slightly higher target price of 40 sen.
It last traded at 47 sen, giving it a market capitalisation of RM521 million.