KUALA LUMPUR: Affin Hwang Capital research has maintained its underweight rating on the media sector amid a lack of positive catalysts to turn around its fortunes.
In a note, the research house said earnings from three media companies under its coverage were weaker than expected for the first quarter of 2019 with print continuing to slide from weak adex and declining hardcopy circulation.
"Given the persistent challenging operating environment, we maintain our UNDERWEIGHT rating for the media sector.
"While we expect media players to continue strengthening their new revenue streams, and continual cost rationalisation efforts, a turnaround may prove difficult in view of the unfavourable conditions in the industry," it said.
Affin Hwang has a sell rating for Star, Media Prima and Media Chinese International and a hold rating for Astro
.
"For relative exposure, Astro is our preferred pick while MPR is our top SELL for the media sector given the lack of immediate catalysts and a subdued adex sentiment affecting both its Print and TV segments," it said.
In its outlook, the research house expects Media Prima and Astro to achieve positive Ebitda by end-2020.
It said home shopping sales for Astro and Media Prima have been promising with both achieving strong year-on-year revenue growth of 16.6% and 23.7% to RM98.8mil and RM54.5mil in their latest quarter respectively.
Affin Hwang added that media companies' expansion of digital presence to complement existing digital assets has been positive so far in capturing digital adex share as advertisers move towards the digital space.
For 1Q19, media sector revenue fell 16.3% to RM543.5mil from RM649.3mil in the previous corresponding quarter.
It noted there was a normalising effect after coming off an adex-supported year in 2018 due to the 14th General Election in addition to the already cautious ad spending.
"In tandem with top-line contraction, the sector suffered core losses in 1Q19 with MCIL and MPR treading in the red whereas Star recorded a slim core profitability," it said.
