Successfully reported this slideshow.
SECTOR UPDATE

                                                                                                           ...
Reality check
Looking beyond 1Q09’s adex contraction of 4%, we still expect ad volume to remain
under pressure and stay so...
Figure 1: 1Q adex in 1998, 2008 and 2009
Segments (RM'm)                         1998                   1Q98              ...
Figure 2: Adex growth in Malaysia (1997-2008)

     30%

                                                                 ...
Figure 4: OECD CLI very close to the low in Jan 75

    CLI

   105


   100


    95


    90

          1961

          ...
Figure 6: Business Condition Index (BSI) and Consumer Sentiment Index (CSI)

  140.0
  120.0
  100.0
    80.0
    60.0
   ...
1Q09 results set the tone
2009 earnings likely to remain weak. We expect the upcoming 1Q09 results for the
media companies...
QUICK TAKES

                                                                                                     20 May 2...
Financial summary
                                                                         FYE Jan                        ...
DISCLAIMER

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citiz...
New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of...
RECOMMENDATION FRAMEWORK #2 **

                                STOCK RECOMMENDATIONS                                     ...
Upcoming SlideShare
Loading in …5
×

Adex Data Point South

1,092 views

Published on

• 1Q09 adex data point south. Although total gross adex for Jan-Mar 09 shrank
3.9%, it was better than the 20% contraction seen after the 1997-8 Asian financial
crisis. The worst performer was the newspaper segment which saw a 9% decline
compared with a 3.7% growth for TV adex. But ad volume visibility extends only 2-3
months out, leaving question marks over advertising commitments for 2H09.
• Downbeat expectations. The lacklustre adex showing in Jan-Mar 09 ties in with
the 1Q09 results reported by Media Prima and NSTP. It also confirmed the
generally bearish expectations of the media companies since the beginning of the
year, with a few being taken by surprise by the magnitude of the deceleration. Our
previous 2009 projection of an adex range of 1.1% contraction to 6% growth does
not hold and we now revise it to 6-10% adex contraction.
• Newspapers at risk. Fundamental risks could be more severe for newspaper
companies as newspaper adspend continues to take a hit from depressed GDP
data. Although there are signs of resilience in the Malay newspaper segment, this
does not mean total immunity against the potential worsening of adex volume in the
coming months. The top Malay newspaper NST’s Harian Metro is the main winner
but this is not expected to help the group much given that Harian Metro is a small
contributor.
• Indicators leading at inflection point? We concur with our economic research
team’s view that the CLI could hit the trough in Jun-Aug 09 and that the economic
recovery from the trough is likely to take at least 12 months given the severity of the
current global crisis. Advertisers should reposition their spending for a gradual
recovery from 2010. Historical trends suggest that adex in Malaysia should recover
in 1Q2010 based on a 3-6 months’ lag period.
• End-2009 a good potential entry point. We believe end-09 will be a good re-entry
point for exposure to selected media stocks as positives such as earnings visibility,
improved sentiment of advertisers, cheaper newsprint and gradual economic
recovery are likely to kick in as catalysts then. We will monitor closely the situation
on the ground and official stats but so far, adex for the months ahead appears to be
southbound. The share prices of media companies have recovered somewhat since
the start of the year and we fail to see any additional near-term re-rating catalysts.
• Staying NEUTRAL on media sector for now. In view of this, we maintain our
NEUTRAL stance on the media sector but recommend investors to switch to Astro
(Trading Buy) which has very little exposure to adex and minimal downside risks to
its Malaysian operations where the subscriber trend could turn out to be resilient.
We remain NEUTRAL on Media Prima (MPR MK), Star Publications (STAR MK)
and Media Chinese International (MCIL MK). NSTP is kept as an
UNDERPERFORM

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Adex Data Point South

  1. 1. SECTOR UPDATE 20 May 2009 MALAYSIA CIMB Research Report NEUTRAL Maintained Media AD-amantly southbound Sharizan Rosely +60 (3) 2084 9864 - sharizan.rosely@cimb.com • 1Q09 adex data point south. Although total gross adex for Jan-Mar 09 shrank 3.9%, it was better than the 20% contraction seen after the 1997-8 Asian financial crisis. The worst performer was the newspaper segment which saw a 9% decline compared with a 3.7% growth for TV adex. But ad volume visibility extends only 2-3 months out, leaving question marks over advertising commitments for 2H09. • Downbeat expectations. The lacklustre adex showing in Jan-Mar 09 ties in with the 1Q09 results reported by Media Prima and NSTP. It also confirmed the generally bearish expectations of the media companies since the beginning of the year, with a few being taken by surprise by the magnitude of the deceleration. Our previous 2009 projection of an adex range of 1.1% contraction to 6% growth does not hold and we now revise it to 6-10% adex contraction. • Newspapers at risk. Fundamental risks could be more severe for newspaper companies as newspaper adspend continues to take a hit from depressed GDP data. Although there are signs of resilience in the Malay newspaper segment, this does not mean total immunity against the potential worsening of adex volume in the coming months. The top Malay newspaper NST’s Harian Metro is the main winner but this is not expected to help the group much given that Harian Metro is a small contributor. • Indicators leading at inflection point? We concur with our economic research team’s view that the CLI could hit the trough in Jun-Aug 09 and that the economic recovery from the trough is likely to take at least 12 months given the severity of the current global crisis. Advertisers should reposition their spending for a gradual recovery from 2010. Historical trends suggest that adex in Malaysia should recover in 1Q2010 based on a 3-6 months’ lag period. • End-2009 a good potential entry point. We believe end-09 will be a good re-entry point for exposure to selected media stocks as positives such as earnings visibility, improved sentiment of advertisers, cheaper newsprint and gradual economic recovery are likely to kick in as catalysts then. We will monitor closely the situation on the ground and official stats but so far, adex for the months ahead appears to be southbound. The share prices of media companies have recovered somewhat since the start of the year and we fail to see any additional near-term re-rating catalysts. • Staying NEUTRAL on media sector for now. In view of this, we maintain our NEUTRAL stance on the media sector but recommend investors to switch to Astro (Trading Buy) which has very little exposure to adex and minimal downside risks to its Malaysian operations where the subscriber trend could turn out to be resilient. We remain NEUTRAL on Media Prima (MPR MK), Star Publications (STAR MK) and Media Chinese International (MCIL MK). NSTP is kept as an UNDERPERFORM. Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) Ticker Recom. (Local) (Local) (US$ m) CY2009 CY2010 (%) CY2009 CY2009 CY2009 Media Prima MPR MK N 1.26 1.40 305 13.8 12.0 (6.5) 3.6 28.7 3.6 Astro ASTR MK TB 2.58 3.00 1,414 16.3 12.3 53.4 5.2 24.5 6.4 Star Publications STAR MK N 3.20 3.50 670 12.9 11.9 8.3 1.8 14.1 6.6 MCI MCIL MK N 0.57 0.60 272 12.0 11.4 (5.4) 0.8 7.2 3.5 NSTP NST MK U 1.18 0.90 73 13.2 13.3 (21.0) 0.3 2.1 4.2 Simple average 13.6 12.2 5.8 2.3 15.3 4.9 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research Please read carefully the important disclosures at the end of this publication.
  2. 2. Reality check Looking beyond 1Q09’s adex contraction of 4%, we still expect ad volume to remain under pressure and stay southbound in the months ahead. The industry is unlikely to bottom out any earlier than end-09, at which point the risk-reward ratio is likely to turn positive for investors as advertisers reposition their spending for a gradual recovery in 2010. Media stocks were bombed-out last year and have recovered somewhat since the start of year. As of now, we fail to see any additional near-term re-rating catalysts. Adex contraction in 2009 could range between 6% and 10%. 1Q09 adex report card 4% contraction, led by newspapers. According to Nielsen Media Research (NMR), total adex pulled back by 4% yoy in 1Q09, mainly because of a 9% decline in newspaper ad volume. The post Chinese New Year (CNY) month of Feb 09 was the worst month for almost all mediums, which saw ad volume drops of between 13% and 37%. Ad volume for newspapers and TV dipped 13-14% in Feb but only the TV segment recovered in Mar 09. Chinese newspapers witnessed the worst February month in five years while the Malay segment showed some signs of resilience compared to the English segment. Newspapers’ share of total adex continued to shrink from 59% in 1Q08 to 56% in 1Q09 while TV’s market share reached an all-time high of 33%. Decline was not as bad as in 1998. The 4% contraction in total ad volume in 1Q09, amidst the global economic slowdown, is muted compared to the 20% plunge in 1Q98 adex during the Asian financial crisis. The 1Q09 contraction came largely from a 30% slump in adex in Feb, led by the TV segment. Newspapers held the biggest market share of 60% but remained the worst-performing segment for that quarter. For 2009, while adex volume is likely to continue shrinking for the rest of the year, the deceleration does not appear to be mirroring the 1998 downshift. Furthermore, the 4% decline in 1Q09 reflects the high base from the election-driven adspend that occurred in 1Q08. Media players have low expectations. The lacklustre adex showing in Jan-Mar 09 ties in with the 1Q09 results reported by Media Prima and NSTP. This also confirmed the generally bearish expectations of the media companies since the beginning of the year, with a few being taken by surprise by the magnitude of the deceleration. Our previous 2009 projection for an adex range of 1.1% contraction to 6% growth does not hold. [ 2 ]
  3. 3. Figure 1: 1Q adex in 1998, 2008 and 2009 Segments (RM'm) 1998 1Q98 2008 1Q08 2009 1Q09 Jan Feb Mar YTD Jan Feb Mar YTD Jan Feb Mar YTD FTA TV 63.1 31.0 40.0 134.2 129.2 140.3 146.4 416.0 145.1 121.7 164.8 431.6 Newspapers 102.4 67.2 106.5 276.1 268.3 242.5 292.0 802.9 258.2 208.1 264.7 731.0 Magazines 9.0 7.0 7.8 23.9 10.3 10.4 12.9 33.5 10.5 9.0 10.7 30.2 Radio 6.7 4.0 4.8 15.5 21.4 19.0 20.7 61.2 24.7 16.9 25.3 66.8 Cinema 1.3 0.7 0.6 2.6 2.2 2.0 1.0 5.2 2.7 1.3 1.1 5.0 Outdoor 0.8 0.8 1.0 2.6 7.8 7.9 8.2 23.9 8.3 8.2 8.0 24.5 Point Of Sale 2.4 1.6 1.5 5.4 6.7 5.9 6.3 18.9 7.1 6.1 6.5 19.7 Total 185.8 112.4 162.2 460.3 445.9 428.0 487.7 1,361.6 456.6 371.3 481.1 1,308.9 Growth (yoy) 1998 1Q98 2008 1Q08 2009 1Q09 Jan Feb Mar YTD Jan Feb Mar YTD Jan Feb Mar YTD FTA TV 6% -41% -28% -20% 49% 43% 37% 43% 12% -13% 13% 4% Newspapers -20% -25% -19% -21% 16% 17% 17% 17% -4% -14% -9% -9% Magazines 1% -18% -14% -10% -4% 1% 4% 0% 2% -13% -17% -10% Radio -15% -25% -19% -19% 30% 5% 23% 19% 15% -11% 22% 9% Cinema 117% -15% 37% 38% 17% -17% -40% -13% 19% -37% 10% -4% Outdoor -42% -12% -15% -25% -13% -9% -4% -9% 7% 4% -3% 3% Point Of Sale 2% -7% 1% -1% 52% 34% 36% 41% 7% 4% 3% 5% Total -11% -30% -21% -20% 24% 23% 22% 23% 2% -13% -1% -4% Market share (%) 1998 1Q98 2008 1Q08 2009 1Q09 Jan Feb Mar YTD Jan Feb Mar YTD Jan Feb Mar YTD FTA TV 34% 28% 25% 29% 29% 33% 30% 31% 32% 33% 34% 33% Newspapers 55% 60% 66% 60% 60% 57% 60% 59% 57% 56% 55% 56% Magazines 5% 6% 5% 5% 2% 2% 3% 2% 2% 2% 2% 2% Radio 4% 4% 3% 3% 5% 4% 4% 4% 5% 5% 5% 5% Cinema 1% 1% 0% 1% 0% 0% 0% 0% 1% 0% 0% 0% Outdoor 0% 1% 1% 1% 2% 2% 2% 2% 2% 2% 2% 2% Point Of Sale 1% 1% 1% 1% 1% 1% 1% 1% 2% 2% 1% 2% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 1998 : Asian Financial Crisis 2008 : Second strongest adex growth afther the slump in 2005 2009 : Impact of global economic slowdown Source: NMR, CIMB/CIMB-GK Research 6-10% contraction in 2009 2009 previous worst-case scenario compromised. It appears that we had underestimated the degree of adex contraction in 2009. In our Jan 09 sector note, we outlined our worst-case scenario of a 1.1% adex decline as we applied a 2.2x adex- GDP growth multiplier to our previous worst-case estimate of a 0.5% GDP contraction. Applying our revised 3% GDP contraction for 2009 to an unchanged 2.2x multiplier, we now get an adex decline of 6.6% for this year. We would consider this as a base case considering that media players are expecting declines of as much as 10%. This gives a range which is still lower than the 17% plunge in 1998 when monthly double- digit adex contractions lasted for the entire year (Figures 2 and 3 below). Newspaper segment to suffer the most. Fundamental risks could be more severe for newspaper companies as newspaper adspend continues to take a hit from depressed GDP data. Although there are signs of resilience in the Malay newspaper segment, this does not mean total immunity against the potential worsening of adex volume in the coming months. The top Malay newspaper Harian Metro is the main winner but this is not expected to help the group much given that Harian Metro is a small contributor. The TV segment’s bundling strategy will mitigate the weakness in ad volume, which may allow this segment to show ad volume recovery earlier than newspapers. [ 3 ]
  4. 4. Figure 2: Adex growth in Malaysia (1997-2008) 30% Start of global 20% Asian Financial Crisis economic slowdown 10% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Nov-08 -10% Adex contracted by -20% 17.2% in 1998 adex growth GDP growth . Source: NMR, CIMB Research Figure 3: Monthly total adex growth (1997 vs. 1998) 20% 13.0% 13.4% 15% 12.4% 11.8% 11.7% 12.5% 12.1% 11.2% 10.1% 8.6% 8.9% 10% 6.5% 5% 0% -5% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -10% -15% -11.2% -20% -17.2% -19.3% -19.9% -19.5% -19.1% -18.5% -17.8% -17.9% -18.4% -18.7% -18.2% -25% 1997 1998 . Source: NMR, CIMB Research Spotting the inflection point Indicators at inflection point. Leading economic indicators suggest that the decelerating adex, which tracks GDP performance, could come to a turning point sometime towards the end of 2H09. According to our economic research team, the bottom of this economic downturn will be reached when we see (i) stabilising financial markets and no further systemic events, (ii) restoration of investor confidence in asset valuations and alleviation of counterparty concerns, (iii) normalisation of credit markets, especially in the inter-bank market, (iv) resumption of borrowing and lending activities, and (v) an end to the US housing correction. The OECD CLI is designed to provide early signals of turning points (peaks and troughs) between upswings and downswings in the growth cycle of economic activity. Cyclical turning points are directly captured in the ratio to trend form of the CLI. When the CLI is increasing and above 100, it signals an expansion; decreasing but above 100 signals a downturn; decreasing and below 100 signals a slowdown; and increasing but below 100 signals a recovery. Typically, turning points in industrial production or GDP have been found about six months after the signals of turning points had been detected in the CLI. [ 4 ]
  5. 5. Figure 4: OECD CLI very close to the low in Jan 75 CLI 105 100 95 90 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Source: Organisation for Economic Co-operation and Development (OECD) Figure 5: Malaysia’s leading index vs. OECD leading index Annualised 6M Malay sia's Leading Index OECD CLI (RHS) % chg Leading Index (trend line) CLI 25 104 20 102 15 100 98 10 96 5 94 0 92 -5 90 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Source: DOS, Organization for Economic Co-operation and Development (OECD) What it means. While the CLIs will continue to fall, the pace of decline should continue to ease. Our economic research team believes the CLI could hit the trough in Jun-Aug 09. Due to the severity of the current global crisis, the recovery process – from the CLI hitting bottom and stabilising and eventually moving into positive territory – is likely to take at least 12 months from the estimated trough in Jun-Aug 09. For now, the situation could get worse before small improvements are evident in the later part of the year. Taking into account the 6-month lag between the CLIs and the real economy, the projected trough in CLI means that the real economy should begin recovering at end-09 or early-2010. The recovery process is expected to be gradual before settling on a healthy rate of expansion. Positive signs for advertisers Turning the corner at the end of 2009. What does this mean for advertisers? Business conditions and the advertising environment are set to improve moderately over the next 6-12 months from the estimated trough in Jun-Aug 09. Advertisers should view this positively and reposition their spending for a gradual recovery from 2010. The potential shift in advertisers’ sentiment should arrest further deterioration in ad volume in 2010. BSI and CSI. After plunging 38-55% in 2008, the Business Condition Index (BSI) and Consumer Sentiment Index (CSI) recovered 11-13% in Mar 09. The BSI and CSI should continue to track a mild recovery path as long as economic data continue to show an easing in the pace of deterioration. In view of this, we look beyond the 1Q09 adex contraction of 4% and foresee adex volume weakness to bottom out sometime at end-09. [ 5 ]
  6. 6. Figure 6: Business Condition Index (BSI) and Consumer Sentiment Index (CSI) 140.0 120.0 100.0 80.0 60.0 Turning point 40.0 20.0 0.0 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Business Condition Index Consumer Sentiment Index Source: CEIC The auto and property industries, which are among the top 20 major advertisers in Malaysia and make up 20-30% of total industry adex, have also showed signs of a turnaround based on the Auto Industry Index (AII) and Residential Property Index (RPI). Figure 7: Auto Industry Index (AII) and Residential Property Index (RPI) 175.0 150.0 125.0 100.0 75.0 50.0 Turning point 25.0 0.0 Mar-03 Nov-03 Jul-04 Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Auto Industry Index Residential Property Index Source: CEIC Medium-term outlook is weak Ad spending trails GDP data by 3-6 months. We observe that over the past 10 years, ad volume growth followed the trend of both the leading indicators and GDP growth, but with roughly a time lag of 3-6 months. Using the Jun-Aug 09 trough for both CLI and Malaysian GDP as a reference point, the historical trend suggests a recovery path for adex from 1Q2010 (Figure 8). But medium-term outlook remains weak. From our industry checks, it appears that advertisers are still cautious and retain a wait-and-see attitude. On yoy basis, 2Q09 adspend is likely to contract by around 8-10%. Visibility of adspend in 2H09 is even murkier as there are no major events to drive advertising this year compared to 2008 which featured the Olympics and Euro 2008. Figure 8: Adex growth tracks leading index and GDP 20.0 40 15.0 Adex growth lags GDP 30 growth by 3-6 months 10.0 20 5.0 10 0.0 0 1Q98 3Q98 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 -5.0 -10 -10.0 -20 -15.0 -30 Leading index (RHS) Malaysia GDP Adex growth (LHS) Source: DOS, Organization for Economic Co-operation and Development (OECD) [ 6 ]
  7. 7. 1Q09 results set the tone 2009 earnings likely to remain weak. We expect the upcoming 1Q09 results for the media companies under our coverage to set the tone for media companies’ earnings for 2009. Data from NMR already indicate the weakness of ad volume in 1Q09 which should be reflected in the numbers for these companies. We would not be surprised if other companies like Star and Media Chinese reported disappointments in their numbers. We are maintaining our earnings forecasts and target prices for these stocks while noting the possibility of a downgrade after the release of their quarterly results. Earlier indications from NMR are negative, with both English and Chinese newspaper adex falling 15% yoy in 1Q09. For newspaper companies, the benefits of cheaper newsprint prices can only be felt in 2010 when newsprint inventories run out. Newsprint spot prices have dropped by 18% to US$623/tonne from a peak of US$756/tone at end-Dec 08. It will take a few months to confirm the downtrend as prices could pull back due to plant shutdowns in North America and rising oil prices. Figure 9: Newsprint price (US$/tonne) 779 729 679 629 Peaked at US$756/tonne in end-08 579 529 Jan-08 May-08 Jun-08 Jul-08 Oct-08 Nov-08 Dec-08 Jan-09 May-09 Feb-08 Mar-08 Apr-08 Aug-08 Sep-08 Feb-09 Mar-09 Apr-09 Source: Bloomberg Valuation and recommendation End 2009 a good potential entry point. We believe end-09 will be a good re-entry point for exposure to selected media stocks as positives such as earnings visibility, improved sentiment of advertisers, benefits of cheaper newsprint and gradual economic recovery are likely to kick in as catalysts then. We will monitor closely the situation on the ground and official stats but so far, adex for the months ahead appears to be southbound. The share prices of media companies have recovered somewhat since the start of the year and we fail to see any additional near-term re- rating catalysts. Short-term correction would not be a good buying opportunity. We look beyond the 1Q09 adex contraction of 4% and foresee adex volume to stay southbound in the months ahead. A bottoming-out will probably occur no earlier than end-09, a point when we think the long-term risk-reward ratio is likely to turn positive. Staying NEUTRAL on media sector for now. In view of this, we maintain our NEUTRAL stance on the media sector. We recommend investors to switch to Astro whose appeal lies in its limited exposure to adex and minimal downside risks to its Malaysian operations where the subscriber trend could turn out to be resilient. Astro remains a TRADING BUY with a higher DCF-based target price of RM3.00 (RM2.40 previously), tagged to an unchanged 10% discount to DCF, which we now base on a WACC of 13% (15.5% previously). Its dividend yield of over 6% is among the highest in the sector. We remain NEUTRAL on Media Prima (MPR MK), Star Publications (STAR MK) and Media Chinese International (MCIL MK). NSTP is kept as an UNDERPERFORM. [ 7 ]
  8. 8. QUICK TAKES 20 May 2009 MALAYSIA CIMB Research Report TRADING BUY Maintained Astro All Asia Networks Plc RM2.58 Target: RM3.00 Switch to this channel Mkt.Cap: RM4,990m/US$1,414m TV - Satellite ASTR MK / AAAN.KL Sharizan Rosely +60 (3) 2084 9864 – sharizan.rosely@cimb.com 1Q09 adex Firmly southbound. Although industry gross adex for Jan-Mar 09 shrank 3.9%, it was better than the 20% contraction seen after the 1997-8 Asian financial crisis. The worst performer was the newspaper segment which saw a 9% decline compared to a 3.7% growth for TV adex. But ad volume visibility extends only 2-3 months out, which leaves question marks over advertising commitments for 2H09. Not a major concern for Astro. We do not expect the weakening adex in 2009 to have a material impact on Astro as adex constitutes less than 10% of its total revenue, the bulk of which comes from subscription fees. A projected 6-10% slowdown in adspend in 2009 will, therefore, not have a substantial impact on Astro. Astro’s domestic pay TV operations remain the group’s key driver and could turn out to be more resilient than expected. Valuation and recommendation Maintain TRADING BUY with higher target price of RM3.00. We retain our forecasts which already reflect lower EBITDA margins from higher content costs and a higher churn of 9%. Considering that this will be a challenging year for adex, Astro looks appealing as it has very little exposure to adex and the downside risks for its Malaysian operations are minimal as the subscriber trend could turn out to be resilient. Using a lower WACC of 13% (15.5% previously), we get a higher target price of RM3.00 (RM2.40 previously), still pegged to a 10% discount to its DCF value. We reiterate our TRADING BUY recommendation on Astro as the outlook continues to shift to its core Malaysian pay TV operations and India, where execution and regulatory risks are much lower than in Indonesia. From a recent news report, it appears that the preliminary ruling by the Singapore International Arbitration Centre (SIAC) favoured Astro in that it urged PT Ayunda Prima Mitra, a subsidiary of Lippo Group, to discontinue its lawsuit against Astro. While this may not mark the end of what is likely to be a long-drawn legal process, we view this progress positively. Potential re-rating catalysts for Astro are (i) continued progress in sorting out the legalities in Indonesia, (ii) stronger-than-expected performance for its Malaysian operations, and (iii) investors’ switch from adex-centric companies. Astro’s dividend yield of over 6% is among the highest in the sector. [ 8 ]
  9. 9. Financial summary FYE Jan 2008 2009 2010F 2011F 2012F Revenue (RM m) 2,601.7 2,971.5 3,166.4 3,400.9 3,602.4 EBITDA (RM m) 556.5 541.4 743.0 823.9 982.5 EBITDA margins (%) 21.4% 18.2% 23.5% 24.2% 27.3% Pretax profit (RM m) 136.6 (372.3) 416.7 569.9 768.5 Net profit (RM m) (6.2) (529.2) 313.8 428.7 577.7 EPS (sen) (0.3) (26.6) 15.6 21.4 28.8 EPS growth (%) (103.8%) (8,349.6%) 158.7% 36.6% 34.7% P/E (x) nm nm 16.5 12.1 9.0 Core EPS (sen) (0.7) 8.0 16.5 21.4 28.8 Core EPS growth (%) (108.8%) 1,199.0% 107.7% 29.2% 34.7% Core P/E (x) nm 32.4 15.6 12.1 9.0 Gross DPS (sen) 13.9 13.9 16.7 18.9 19.3 Dividend yield (%) 5.4% 5.4% 6.5% 7.3% 7.5% Price chart P/BV (x) 3.1 5.5 5.2 4.5 3.5 3.7 5.00 ROE (%) (0.4%) (41.4%) 32.6% 39.7% 44.2% 4.00 Net gearing (%) N/A 40.0% 20.8% N/A N/A 3.2 3.00 Net cash per share (RM) 0.10 N/A N/A 0.07 0.27 2.7 2.00 P/FCFE (x) (271.4) 35.3 12.9 8.4 7.5 2.2 1.00 EV/EBITDA (x) 9.2 10.7 7.9 6.8 5.4 1.7 0.00 % change in EPS estimates - - - May-08 Oct-08 Mar-09 Volume 1m (R.H .Scale) As All As Networks Plc tro ia CIMB/Consensus (x) 1.46 1.47 0.99 Source: Bloomberg Source: Company, CIMB Research, Bloomberg [ 9 ]
  10. 10. DISCLAIMER This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMB, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. The term “CIMB” shall denote where applicable the relevant entity distributing the report in that particular jurisdiction where mentioned specifically below shall be a CIMB Group Sdn Bhd’s affiliates, subsidiaries and related companies. (i) As of 20 May 2009, CIMB has a proprietary position in the following securities in this report: (a) Star Pubilcations. (ii) As of 20 May 2009, the analyst, Sharizan Rosely who prepared this report, has an interest in the securities in the following company or companies covered or recommended in this report: (a) - The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report and accordingly, neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB-GK Research Pte. Ltd. (“CIMB-GK”) and CIMB-GK notifies each recipient and each recipient acknowledges that CIMB-GK is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cwlth) in respect of financial services provided to the recipient. CIMB-GK is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cwlth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual recipient. France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument. Hong Kong: This report is issued and distributed in Hong Kong by CIMB-GK Securities (HK) Limited (“CGHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB-GK Securities (HK) Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CGHK has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CGHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CGHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong). Indonesia: This report is issued and distributed by PT CIMB-GK Securities Indonesia (“CIMB-GKI”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB-GKI has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB-GKI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB-GKI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations. Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. [ 10 ]
  11. 11. New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB-GK Research Pte Ltd (“CIMB-GKR”). Recipients of this report are to contact CIMB-GKR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB-GKR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMB-GKR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB-GKR. As of 20 May 2009 CIMB-GK Research Pte Ltd does not have a proprietary position in the recommended securities in this report. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. Thailand: This report is issued and distributed by CIMB-GK Securities (Thailand) Ltd (“CIMB-GKT”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB-GKT has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB-GKT. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB-GKT. United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom: This report is being distributed by CIMB-GK Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the “Order”) who have professional experience in investments of this type or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (all such persons together being referred to as “relevant persons”). A high net worth entity includes a body corporate which has (or is a member of a group which has) a called-up share capital or net assets of not less than (a) if it has (or is a subsidiary of an undertaking which has) more than 20 members, £500,000, (b) otherwise, £5 million, the trustee of a high value trust or an unincorporated association or partnership with assets of no less than £5 million. Directors, officers and employees of such entities are also included provided their responsibilities regarding those entities involve engaging in investment activity. Persons who do not have professional experience relating to investments should not rely on this document. United States: This research report is distributed in the United States of America by CIMB-GK Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB-GK Research Pte Ltd solely to persons who qualify as quot;Major U.S. Institutional Investorsquot; as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors and investment professionals whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not an Institutional Investor must not rely on this communication. However, the delivery of this research report to any person in the United States of America shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. For further information or to place an order in any of the above- mentioned securities please contact a registered representative of CIMB-GK Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. RECOMMENDATION FRAMEWORK #1* STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: The stock's total return is expected to exceed a relevant OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 12 months. expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant NEUTRAL: The industry, as defined by the analyst's coverage universe, is benchmark's total return. expected to perform in line with the relevant primary market index over the next 12 months. UNDERPERFORM: The stock's total return is expected to be below a relevant UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, benchmark's total return by 5% or more over the next 12 months. is expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant TRADING BUY: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 3 months. expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant TRADING SELL: The industry, as defined by the analyst's coverage universe, benchmark's total return by 5% or more over the next 3 months. is expected to underperform the relevant primary market index over the next 3 months. * This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB-GK Research Pte Ltd (Co. Reg. No. 198701620M) [ 11 ]
  12. 12. RECOMMENDATION FRAMEWORK #2 ** STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: Expected positive total returns of 15% or more over the next OVERWEIGHT: The industry, as defined by the analyst's coverage universe, 12 months. has a high number of stocks that are expected to have total returns of +15% or better over the next 12 months. NEUTRAL: Expected total returns of between -15% and +15% over the next NEUTRAL: The industry, as defined by the analyst's coverage universe, has 12 months. either (i) an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months. UNDERPERFORM: Expected negative total returns of 15% or more over the UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, next 12 months. has a high number of stocks that are expected to have total returns of -15% or worse over the next 12 months. TRADING BUY: Expected positive total returns of 15% or more over the next 3 TRADING BUY: The industry, as defined by the analyst's coverage universe, months. has a high number of stocks that are expected to have total returns of +15% or better over the next 3 months. TRADING SELL: Expected negative total returns of 15% or more over the next TRADING SELL: The industry, as defined by the analyst's coverage universe, 3 months. has a high number of stocks that are expected to have total returns of -15% or worse over the next 3 months. ** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. [ 12 ]

×