PETALING JAYA: Hong Leong Investment Bank (HLIB) has discontinued its coverage on Star Media Group Bhd, citing minimal investor interest and lack of growth catalysts towards the company.
At the same time, the investment bank has also maintained its “neutral” stance on the media industry, expecting a downward trend in advertising expenditure (adex) for the sector.
In a note today, HLIB said it projected a decline of 3.4% year-on-year (y-o-y) in advertising spending during the initial five months of 2023 compared to the preceding year, signifying a potential deceleration in industry growth.
“We maintain ‘neutral’ on the sector and make no changes to our calls and target prices (TPs) for Astro Malaysia Holdings Bhd (‘hold’; TP: 59 sen) and Media Prima Bhd (‘sell’; TP: 31 sen), while we cease (our) coverage on Star Media Group Bhd,” it said.
On Dec 16 last year, CGS-CIMB Research also ceased coverage of Star Media with the last target price of 44 sen and an “add” rating when its stock was traded at 29.5 sen.
Digital advertising potential
Moving forward, HLIB projects that advertisers would reduce their marketing expenditures due to waning consumer confidence, inflationary forces, and the decline of post-economic reopening “revenge spending”.
HLIB also predicts that an increasing number of advertisers will allocate larger budgets to digital platforms, driven by the continuous growth in the domestic smartphone penetration rate.
There are approximately 29.5 million smartphone users in Malaysia as of 2022, a significant number considering the country’s population is estimated to be 33.9 million for that year.
Mobile devices, HLIB said, constitute 78% of digital advertising earnings.
Given that the largest demographic segment in Malaysia comprises the “Gen Z” group, who account for 29% of the total population and spend about eight hours daily on online activities, the undeniable importance of mobile advertising becomes significant.
HLIB remarked that advertisers are placing greater importance on this demographic, as their disposable income rises progressively with each year they spend in the workforce.
As at 3.49pm, Star Media’s share price was down 0.5 sen or 1.32% at 37.5 sen, giving it a market capitalisation of RM273.5 million.
Meanwhile, Media Prima’s shares were flat at 45 sen while Astro’s rose one sen or 1.92% to 52.5 sen, giving each company a market capitalisation of RM493.59 million and RM2.74 billion respectively.