Media

Media

Investment thesis

TV ad spend posted another significant decline for June, suggesting persisting weak consumption spending. Note that there was no discernable ad spend surge during the month tied to the 2014 FIFA World Cup. We expect July TV ad spend to decline by 3-5% YoY, which would be shallower than June’s 7% YoY fall. Within Media space, MAJOR remains our only pick, as it isn’t impacted by the advent of digital TV. Among all of our other Media coverage, heavy digital-related OPEX will squeeze profits for the next 6-9 months. 
June ad spend was weaker than expected
Nielsen reported YoY declines of 11% in total ad spend and 7% in TV ad spend for June, following YoY drops of 12% in total ad spend and 9% in TV spend in May. The falls clearly indicate that ad budget-cutting persists among small to mid-sized advertisers. The drop in June TV ad spend was deeper than our estimate of a 3-5% YoY decline. On a MoM basis, total spend inched up just 1%, so there was no obvious surge in spend tied to the FIFA World Cup.
All media except transit posted YoY declines. Radio spend tumbled 18% YoY (following a 15% YoY drop in May). Newspaper and magazine spend dived by 16% YoY and 24% YoY, respectively, close to the numbers for May. Onscreen ads plunged 28% YoY, much deeper than the 10% YoY drop reported for May (despite the screening of two blockbusters—Transformers 4 and Maleficent).
Aggregate top-10 spend increased, led by two mobile telcos
The top-10 advertisers increased their aggregate spend by 14% YoY in June, following a 6% YoY rise in May, led by two mobile operators—ADVANC (up 53% YoY) and DTAC (up 24% YoY). Note that in May, ADVANC’s spend shot up 59% YoY, but DTAC’s spend dropped 16% YoY. But in June, Unilever cut its spend 13% YoY (against a 12% YoY rise in May). Toyota’s spend jumped 27% YoY in June following a 30% YoY increase in May. Beierdorf’s spend dipped 2% YoY following an 8% YoY rise in May. We assume that ex-top-10 advertisers made deep ad spend cuts in June.  
Expect July TV ad spend to fall by 3-5% YoY
Consumption spending should rise somewhat in 3Q14, then expand much more strongly in 4Q14. But in the meantime, we forecast that TV ad spend will decline 3-5% YoY in July (shallower than the 7% fall for June). Note that 1H14 TV ad spend dropped by 7% YoY and total spend by 9% YoY. Our FY14 projections are YoY drops of 5-7% for TV ad spend and 7-9% for total spend.