Maybank IB: Expects better adex in H2

PETALING JAYA: Maybank IB Research believes the lingering effects of the 6% Goods and Services Tax (GST) on advertising expenditure (adex) sentiment will gradually subside going into the second half after an 8% contraction in adex in the first half of the year.
The research house is maintaining its full-year adex growth forecast of 8%.
It said that there may be a positive surprise end-July and August due to a low base in July and August 2014 caused by the MH17 aviation tragedy.
In the first half of the year, total gross adex eased 8%, but is still in line with Maybank IB Research's 2015 forecast of -8%.
TV and newspaper adex both eased by 9% respectively while radio adex was flat.
For the month of June, total gross adex for June fell 14%, the largest y-o-y contraction on record, even surpassing the global financial crisis trough in February 2009.
Maybank IB Research said the lacklustre June 2015 performance came as a negative surprise as it expected a narrower y-o-y contraction from April when the GST was implemented.
Adex for June was flat m-o-m, reflecting continued poor consumer and adex sentiment as the higher advertising spend traditionally experienced in June ahead of Ramadan and Hari Raya festivities did not materialise this year.
Public sector advertising spend eased 5% year-on-year, no longer supporting weak total gross adex.
"As public sector advertising spend has been exhibiting double-digit y-o-y growth since January, this sudden easing suggests its softening support for the total gross adex in the midst of subdued private sector advertising spend going forward," the research house noted.
Maybank IB Research is maintaining a "neutral" call on the media industry and a "hold" call on all media stocks under coverage save for Media Prima Bhd, which is under review.
Given that June 2015 radio adex was also flat at 1% increase after three months of contraction from March to May, Maybank IB Research said it could suggest a slight recovery in radio adex in the months going forward as advertisers typically migrate part of their advertising spend from free-to-air (FTA) TV and newspaper mediums to the cheaper radio medium during times of poor consumer and adex sentiment.
FTA TV and newspaper adex both fell 16%, the ninth consecutive month of decline. As both FTA TV and newspaper adex fell more than total gross adex, their share of adex fell 1% and 1.3% respectively.
Radio adex grew marginally by 1% and its share of adex also increased 0.9%.