KUALA LUMPUR (July 26): RHB Investment Bank (RHB IB) has maintained its 'neutral' rating for the media sector, and said growth prospects remain challenging due to structural concerns, geopolitical uncertainties and domestic policy headwinds.
In a sector update on Friday, the research house said there are downside risks to advertising spending, due to lingering effects of diesel subsidy rationalisation, which continues to dampen sentiment.
“With the weak earnings prognosis priced in, we continue to advocate a tactical trading strategy focusing on stocks with positive news flows.
“We remain 'neutral' on the [media] sector,” the house said.
RHB IB said share prices of media stocks under its coverage had fallen by about 13% year-to-date, on weak corporate earnings and sluggish advertising expenditure.
“Aggregate core sector earnings plunged by 40% quarter-on-quarter (down 45% year-on-year) in the first quarter of 2024, with some seasonal elements at play, partially mitigated by cost efforts,” it said.
Earnings momentum to remain lacklustre
RHB IB said it sees the subdued sector earnings momentum persisting, on the back of tighter consumer purse strings and a cautious external environment (with geopolitics and macroeconomic headwinds).
“Cost optimisation should remain a key narrative for media players. Astro Malaysia Holdings Bhd (KL:ASTRO) previously disclosed a one-third cost reduction from the revamp of its customer support system, with further digitalisation of processes expected to contribute to additional operating expenditure (opex) savings in the longer term.
“We note it is also shifting its playout service to the cloud, which would see the removal of costs associated with maintaining legacy systems.
“Astro stands to also save RM10 million to RM15 million per quarter in opex, depreciation and interest cost from the decommissioning of six transponders on Measat-3a, which reaches its end of life in July,” the house said.