KUALA LUMPUR (Sept 6): Malaysia’s traditional media companies will likely trudge against sustained headwinds on consumer sentiment and advertising spending despite recent improvements, Kenanga Investment Bank warned.

Apart from free-to-air television operators, traditional media companies may struggle to capitalise on the rebound in advertising expenditure projected to grow 10.8% in 2024, amid intense competition from new media platforms, Kenanga flagged in a post-earnings sector note.

Mass boycotts of major brands are also dragging on advertising spending amid ongoing conflicts in Gaza, the house said. “We believe these companies have cut their marketing budgets to cope with revenue erosion and weakened sentiment,” Kenanga said.

Global consumer brands have been facing intense and protracted boycotts in Malaysia, due to their purported support or perceived link to Israel amid the ongoing conflict in Gaza that has killed tens of thousands of people.

Sales at multinational fast food restaurants to sportswear have been hit, though there are signs that the boycotts are easing gradually.

“Moving forward, as the conflict persists, we do not discount the possibility of a protracted shift in consumers’ preference towards local alternative brands,” Kenanga said. “This may diminish advertising expenditure spend and hinder its recovery.”

Kenanga kept its ‘underweight’ call on Malaysian media stocks since it downgraded the sector from ‘neutral’ on Dec 12, 2023.

Indicators point to pressure on consumers from concerns over rising cost of living from impending subsidy rationalisation, Kenanga flagged. Businesses meanwhile are still pessimistic, judging from MIER’s Business Conditions Index, the house said.

On top of revenue pressure, traditional media companies are burdened by legacy assets such as expansive corporate headquarters, costly printing plants, and a bloated staff force, Kenanga added.

The house has Astro Malaysia Holdings Bhd (KL:ASTRO) and Media Chinese International Ltd (KL:MEDIAC) on ‘underperform’, and Star Media Group Bhd (KL:STAR) on ‘market perform’, while Media Prima Bhd (KL:MEDIA) is the sole stock with an ‘outperform’ rating.