PP 7767/09/2010(025354)

Malaysia
RHB Research
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Se ctor Up dat e
25 August 2010
MARKET DATELINE

Media Recom : Overweight

(Upgraded)
Jul ’10 Adex Grew 19.3% YoY

Table 1 : Media Sector Valuations

Core Core Net
Fair EPS EPS GWTH PER Gearing GDY
FYE Price value (sen) (%) (x) (x) (%) Rec
(RM) (RM) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11 FY10
Star Dec 3.60 4.20 24.3 27.8 24.2 14.2 14.8 12.9 net cash net cash 6.4 OP
Media Prima Dec 2.12 2.57 13.2 16.4 90.9 24.5 16.1 12.9 0.5 0.3 4.7 OP
MCIL^ Mar 0.84 1.16 9.0 8.7 12.7 -4.1 9.3 9.7 net cash net cash 7.1 OP
Sector Average 33.8 11.4 13.4 12.0
^FY10 & 11 refer to FY11 & FY12

♦ Jul’s adex for TV and print media grew 19.3% yoy. According to Chart 1: Relative Performance To
FBM KLCI
Nielsen Media Research (NMR), Jul’s gross ad spend for print and TV
media rose 19.3% yoy with both TV and print media reporting yoy growth
of 20.7% and 18.2% respectively. MCIL

♦ Print media – adex once again led by the Chinese dailies. For the
print media segment, Jul’s adex growth was once again led by the Media Prima
Chinese dailies (22.5% yoy), where all of MCIL’s newspapers recorded
FBM KLCI
stronger yoy numbers. This was followed by the Malay dailies, where adex Star
grew 18.3% yoy led by Harian Metro (+22.3% yoy) and Berita Harian
(+13.6% yoy). As for the English dailies, adex grew 15.6% largely due to
stronger adex reported by Malay Mail (+268.3% yoy) and Star (+15.1%
yoy).

♦ TV gross adex growth continues. Jul was another good month for TV,
where gross adex grew by 20.7% yoy. All the FTA TV channels posted
stronger yoy growth. Collectively, Media Prima’s channels posted yoy
growth of 15.4% led by 8TV (+22.3% yoy) and NTV7 (+15.5% yoy).

♦ Adex outlook. Based on our revised projected 2010 GDP growth of 7.3%
(from 6.8% previously) and the average GDP multiplier of 2.1x (between
1989 and 2008), 2010 gross adex could see growth of 15.3%. YTD, adex
growth stood at 22.6%, we expect the growth rate to slow down in 2H10.
PER = 12x
Firstly, following the strong start to the global economic recovery in 1H10,
we believe the economy will likely grow at a more moderate pace in PER = 11x
2H10, although we do not expect the global economy to fall into a double
dip recession. Secondly, adex will now be coming from a higher base. PER = 10x
Nevertheless, adex growth should continue to remain healthy, supported
by sporting events like the Commonwealth Games and upcoming festive
season.

♦ Risks. The risks include: 1) weaker-than-expected consumer spending

and demand (and hence, adex), which could be due to a slower-than-
abc
expected recovery in the global economy, among others; 2) higher-than-
expected newsprint/content costs; and 3) weaker-than-expected RM (vs.
the US$). KLCI

♦ Forecasts. No change to our earnings forecasts for now.

♦ Investment case. We reiterate our Outperform calls on MCIL, Media David Chong, CFA
Prima and Star. Following the recent upgrade in our recommendation for (603) 9280 2179
david.chong@rhb.com.my
Star, we upgrade our stance on the sector to Overweight from Neutral.

Please read important disclosures at the end of this report. Page 1 of 6

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Jul 2010 TV and Print Adex

♦ Jul ’10 TV and print adex grew 19.3% yoy. According to Nielsen Media Research (NMR), Jul’s gross
advertising expenditure (adex) for TV and print media rose 19.3% yoy but flat mom. Jul’s yoy growth was once
again led by the TV segment (+20.7% yoy; -2.0% mom) while the print media also reported commendable
growth of 18.2% yoy (+2.2% mom).

Ad spending grew 22.6% YTD as adex for both TV and print media grew 27.9% yoy and 18.6% yoy respectively.
Once again, we believe this strong yoy growth was mainly due to the low base effect as a result of the weak
economic conditions a year ago, coupled with improving economic conditions and sporting events such as FIFA
World Cup and Thomas/Uber Cup.

♦ Print media – adex once again led by Chinese dailies. Within the print media segment, Jul’s improvement
was once again across the board with: 1) Chinese dailies leading adex growth of 22.5% yoy (+5.4% mom); 2)
Malay dailies chalking up adex growth of +18.3% yoy (+8.8% mom); and 3) English dailies reporting adex
growth of 15.6% yoy (-3.8% mom). Drilling deeper, within the Chinese segment, all of MCIL’s newspapers
recorded stronger yoy numbers (Guang Ming: +41.1% yoy, +11.8% mom; Nanyang: +31.6 yoy, +32.0 mom;
China Press: +21.8% yoy, +5.7% mom; and Sin Chew: +18.3% yoy, +1.1% mom) as the company saw its adex
grow across different segments (e.g. properties and classifieds) and industries (e.g. consumer goods). This was
followed by the Malay dailies, where Harian Metro continued to impress with gross adex jumping 22.3% yoy (flat
mom), followed by Utusan Malaysia and Berita Harian, which grew 16.8% yoy and 13.6% yoy respectively.
Finally, for the English dailies, the yoy jump in adex was led by Star (+15.1% yoy; -2.7% mom), while NST’s
adex also grew 13.6% yoy (-3.5% mom).

YTD (Jan-Jul), both Star and MCIL reported commendable adex growth of 26.2% yoy each respectively. As for
NSTP, YTD adex grew 13.2% yoy, with all three dailies, i.e. Harian Metro (+24.0% yoy), Berita Harian (+11.0%
yoy) and NST (+2.9% yoy) reported strong numbers.

♦ TV gross adex – adex growth continues. Jul’s TV adex grew 20.7% yoy (-2.0% mom) with all FTA channels
posting stronger numbers. Once again, we believe this strong yoy growth was mainly due to the low base effect
and FIFA world Cup as RTM’s TV1 adex performance jumped 108.1% yoy (-31.0% mom). RTM’s TV1 was the sole
FTA channel to broadcast the FIFA 2010 World Cup games. Collectively, Media Prima’s channels posted yoy
growth of 15.4% (flat mom) led by 8TV (+22.3% yoy; -3.4% mom) and TV3 (+12.8% yoy; +1.9% mom). YTD,
gross adex for Media Prima’s channels was up 25.1% yoy mainly due to TV9 (+31.3% yoy) and NTV7 (+23.8%
yoy). TV3’s gross adex also grew 21.8% yoy, which we believe should be positive for the group given that its
discounts are also the lowest among Media Prima’s station (2Q10 discount factor of 54.6% vs. 76.4-81.6% for
other channels). This means that a higher portion of TV3’s gross adex growth would flow down to bottomline.

Adex Outlook

♦ Adex outlook. We expect 2010 would be a relatively better year for ad spending, especially as compared to
2009. Based on our revised projected 2010 GDP growth of 7.3% (from 6.8% previously) and the average GDP
multiplier of 2.1x (between 1989 and 2008), 2010 gross adex could see growth of 15.3%.

While YTD adex growth stood at 22.6% yoy, we expect the growth rate to slow down in 2H10. Firstly, following
the strong start to the global economic recovery in 1HFY10, we believe the economy will likely grow at a more
moderate pace in 2HFY10 although we do not expect the global economy to fall into a double dip recession.
Secondly, adex will now be coming from a higher base. Nevertheless, adex growth should continue to remain
healthy, supported by sporting events like the Commonwealth Games and the upcoming festive season.

Risks

♦ Risks to our view. The risks include: 1) weaker-than-expected consumer spending and demand (and hence,
adex), which could be due to a slower-than-expected recovery in the global economy, among others; 2) higher-
than-expected newsprint/content costs; and 3) weaker-than-expected RM (vs. the US$).

Page 2 of 6

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 25 August 2010

Forecasts And Assumptions

♦ No change to our net profit forecasts. No change to our earnings forecasts for now.

Valuations And Recommendation

♦ Valuations and recommendations unchanged. Our fair values and recommendations remain unchanged for
the print media players, i.e. Star (OP, FV= RM4.20) and MCIL (OP, FV= RM1.16). No change as well to our
fair values and recommendation for Media Prima (OP, FV= RM2.57).

♦ Sector call is upgraded. We recently upgraded our recommendation for Star to Outperform from Market
Perform previously following the stronger-than-expected ad revenue in 1HFY10; although ad spending could slow
down in 4Q10 following the high base effect, we believe the company should benefit from cheaper newsprint
stock as it is currently carrying 10-11 months of newsprint stock at an average cost of US$650/tonne (vs. current
spot price of US$660/tonne). With that, we have upgraded our stance on the sector to Overweight from
Neutral previously.

Chart 2: Print and TV ADEX Chart 3: ADEX By Company

(RMm) (RMm)
600.0 300

250
500.0
200
400.0
150

300.0 100

50
200.0
0

Ju l

Ju l
M ar

M ar

M ar

Ju ly
N ov

M ay

M ay

N ov

M ay
Sep

Sep

Ja n '0 9

Sep
Ja n

Ja n
100.0

Nov
0.0 Media Prima Nexnews NSTP
Ju l

Ju l
M ar

M ar

M ar

J u ly
Nov

M ay

M ay

Nov

M ay
Sep

Sep

J a n '0 9

Sep
Ja n

Ja n

Sin Chew Star Utusan

Nov

Print TV

Source: NMR

Chart 4: Malay Print ADEX By Title Chart 5: Chinese Print ADEX By Title
(RMm)
50

45

40

35

30

25

20

15

10

0
Jul

Jul

July
M ar

M ar

M ar
S ep

Nov

M ay

S ep

M ay

S ep

Nov

M ay
Jan '09
Jan

Jan
Nov

Harian Metro Kosmo Utusan Malaysia Berita Harian

Source: NMR

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 25 August 2010

Chart 6: English Print ADEX By Title Chart 7: TV ADEX By Channel

(RMm)
100
90
80
70
60
50
40
30
20
10
0
Ju l

Ju l
M ar

M ar

M ar

J u ly
Nov

M ay

M ay

Nov

M ay
Sep

Sep

Sep
J a n '0 9
Ja n

Ja n
Nov

Malay Mail New Straits Times The Star

The Edge The Sun

Source: NMR

Chart 8: YoY Adex Growth Chart 9: Media Prima – YoY Adex Growth

(yoy growth)

0.6

0.5

0.4

0.3

0.2

0.1

0
Sep Nov Jan '09 Mar May Jul Sep Nov Jan Mar May July
-0.1

-0.2

Print TV Print + TV

Source: NMR

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Chart 10 : Star – YoY Adex Growth Chart 11: MCIL – YoY Adex Growth

(yoy growth)
0.5

0.4

0.3

0.2

0.1

July
Jul
Sep

Sep
May

Nov

May
Jan '09

Mar

Mar
Jan
Nov

-0.1

-0.2

-0.3

Source: NMR

Chart 12: NSTP – YoY Adex Growth

(yoy growth)

0.5

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
July
Jul
Sep

Sep
Mar

May

Nov

Mar

May
Jan '09

Jan
Nov

-0.05

Source: NMR

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
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The recommendation framework for stocks and sectors are as follows : -

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Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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securities, subject to the duties of confidentiality, will be made available upon request.

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actions of third parties in this respect.

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