PETALING JAYA: Media companies are seeing a hit to their revenue as companies targeted for boycotts arising from the Israel-Hamas conflict scaled back their advertising campaigns.
Instead, the affected companies are redirecting their resources toward crisis management and public relations efforts to protect their brand reputation, said TA Research in a note on Monday.
The research house noted that several brands, which are major advertising expenditure (adex) spenders, have faced customer boycotts for their perceived support of Israel.
“In response, many brands have been compelled to withdraw or scale back their advertising campaigns to avoid further negative exposure.
“As a result of these boycotts and the prevailing negative sentiment, major advertisers are reducing their advertising budgets,” it said in a research note on Media Prima Bhd.
In Malaysia, brands such as McDonald’s, Starbucks, Burger King, and Nestlé have come under fire for their perceived association with Israel in the ongoing Middle East conflict.
TA also said the geopolitical instability has created a challenging business environment, prompting advertisers to adopt a more cautious approach to spending.
It highlighted that reduction in advertising spending has had significant financial repercussions for Media Prima.
“Their revenue has dropped by 4.7% on a quarter-on-quarter basis and a mere growth of 1.1% year-on-year based on their latest filing. This trend is apparent across multiple media segments, including television, digital and print,” it added.
Threat of foreign tech giants
However, the bigger problem confronting media companies is the “continuous, intense competition” from foreign tech giants, TA said.
“The dominance of big tech companies, notably Google and Facebook, has fundamentally disrupted traditional media business models.
“In Malaysia, these tech giants command an estimated 80% to 90% of digital advertising revenue, significantly impacting the financial viability of traditional media outlets,” it said.
TA said this “monopolistic control over digital ad spend” presents substantial economic challenges for media companies, undermining both advertising and subscription-based revenue streams.
“The lack of a regulatory framework exacerbates these challenges, allowing big tech firms to operate with less oversight and accountability, further complicating efforts to manage misinformation, bias and content control,” it added.
Omnia the bright spot
TA acknowledged that Media Prima faces significant challenges from market conditions and intense competition from foreign tech giants.
“However, we believe Media Prima’s true value lies in Omnia, which delivers tailored solutions through its professionalism, experience, comprehensive advertising ecosystem and valuable data.”
Omnia is the group’s omnichannel solution provider that offers creative services and integrated marketing solutions across all of Media Prima’s platforms.
“Backed by its three-year business plan, Omnia is well-positioned to attract more clients through enhanced content and boost sales revenue.
“This includes leveraging the upgrade on their digital billboards, which offer improved pricing power. These initiatives are believed to make Media Prima stay relevant in the industry and improve sales revenue,” it added.
TA has adjusted its revenue growth forecast for Omnia to 7% and 8% for FY2025 and FY2026, respectively, from 2% for both previously.
The research house also revised its FY2024/25/26 core net profit forecast by +6%/+32.1%/+32.4% due to a slightly better outlook for Media Prima and indications of a recovery in industry adex, which rose 22.5% to RM1.4 billion in Q4 2023 from RM1.2 billion in Q1 2023.
TA revised upwards its target price (TP) for Media Prima to 40 sen per share from 36 sen previously. However, it maintained its “sell” recommendation on the stock as its risk-reward potential remains unfavourable.
Media Prima is Malaysia’s largest integrated media company with subsidiaries involved in television, print, radio, out-of-home advertising, content creation, commerce and digital media.
It has four TV channels – TV3, 8TV, ntv7, and TV9 – and three newspaper brands – New Straits Times, Berita Harian and Harian Metro. Its digital arm, REV Media Group, is one of Malaysia’s leading digital publishers with over 35 brands.
For the third quarter ended Mar 31, 2024 (Q3 FY2024), Media Prima posted a net profit of RM2.47 million on RM213.22 million revenue.
For the nine-month period (9M FY2024), it recorded a net profit of RM27.23 million and revenue of RM650.92 million.
Its shares closed 2.2% – or 1 sen lower – at 45 sen on Monday, valuing the group at RM499 million.
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