Gloomy outlook ahead for Malaysia’s media sector, says Analysts

KUCHING: Malaysia’s media sector will likely see subdued growth for the remaining quarters of 2016 as advertising expenditure (adex) by businesses are expected to remain weak, despite the yearend, seasonal holidays, analysts observed.

In a report, the research arm of Maybank Investment Bank Bhd ( Maybank IB Research) pointed out that the Malaysian Institute of Economic Research expects 4Q16 business sentiment to further weaken quarter- on- quarter (q- oq) on lower sales orders, implying little if any seasonal lift to 4Q16 total gross adex.

It also highlighted that consumer sentiment was recently dented by the RM0.15 per litre fuel price increase and the removal of cooking oil subsidies.

Other than the still poor business confidence, it noted that 3Q16 total gross adex was weaker q- o- q due to telecommunication companies (telcos) cutting ad spend by 17 per cent q- o- q and hotels slashing ad spend by 71 per cent q- o- q.

“We understand that telcos are migrating from traditional to online media, which is not monitored, and will continue to do so in 4Q16,” it added.

“We are wary that 3Q16 earnings will be weaker q- o- q as 3Q16 total gross adex is expected to be counter seasonally weaker q- o- q. 4Q16 may not be much better as business confidence has worsened,” Maybank IB Research said.

For 3Q16, it explained that the first nine months of 2016 ( 9M16) total gross adex down seven per cent y- o-y and September 2016 total gross adex down five per cent.

It added, total gross adex contraction y- o-y narrowed from 10 per cent in 1Q16 to three per cent in 2Q16 but widened to seven per cent in 3Q16.

“While the former was expected due to the UEFA Euro Cup, the latter was not, as the Summer Olympics ought to have lifted adex sentiment.

“In fact, 3Q16 total gross adex of RM1.7 billion was counter seasonally down six per cent q- o- q. This portends counter seasonally weaker 3Q16 results q- o-q for adexbased companies,” the research team said.

Overall, Maybank IB Research cut its 2016 total gross adex growth forecast from minus three per cent y- o-y to minus six per cent y- o-y.

It explained, “Our revised forecast implies 4Q16 total gross adex of RM1.8 billion or up only seven per cent q- o- q ( but still down five per cent y- o-y).”

The research team maintained an overall ‘ neutral’ view on the sector.