Analyst bullish on Catcha Media despite rocky start to year
By Karamjit Singh June 20, 2013
- Expects it to ride adex wave when boom comes
- Traditional media players to make acquisitions to cement their positions
MARKET research company Nielsen, released its May adex (advertising expenditure) findings which showed a very encouraging 20.8% year-on-year growth to RM1.142 billion, powered by the strong General Election-related ad spend.
Ad dollars continued to shift from print to TV, while Pay TV adex continued to outstrip that of free-to-air TV (see chart below).
Overall, the Nielsen data sees RHB Research maintain its OVERWEIGHT call on the media sector, with Media Prima being its top pick.
What’s interesting is that although Nielsen does not track online adex, RHB Research Equity analyst Jerry Lee saw fit to make a Buy call on Catcha Media Bhd (Catcha), which reported revenue of RM6.7 million for the first quarter of 2013 with a loss of RM2.9 million.
While Catcha has a stable of print magazines, no one is really buying into the stock for its print assets and current revenue. Rather, investors are buying into a future when online adex will explode and where seasoned Internet players like Catcha are deemed to have an advantage in understanding how this market works and are likely to capture most of the revenue.
That future, Lee feels, could be closer than many think.
In his Media sector report, he writes that Catcha is still undervalued by the market and that the company is on the right growth trajectory. Adding to its prospects is the proposed merger with Says.com which could boost its future earnings and expedite its turnaround.
“All in all, we are positive on its future development as the Internet space is becoming more popular and Catcha has the first-mover advantage riding on the wave of a boom when it occurs,” he says.
Digital News Asia (DNA) sent Lee some questions to understand his confidence in the future of online adex and asked if the market was underestimating the ability of the traditional media companies to compete in the online space.
DNA: While Nielsen does not track online adex, what does the data that you track, tell you about this market?
Lee: There are no mechanism-appropriate sources that can show such data quantitatively, but from my meetings and interviews with all the major market players, it shows that this segment in the media market is growing strongly. And they have prepared for such a wave to emerge.
DNA: In your mind, what factors coming together will catalyse this "wave of boom" you describe?
- Improvement of Internet infrastructure –faster and [more] stable Internet speeds.
- Higher penetration rate of Internet coverage in the country.
- As Malaysia develops, it is an inevitable trend that people will get more information from the Internet, which is flexible, faster and more eco-friendly. Malaysia’s adoption will track the development curve of the developed countries.
DNA: There seems to be a feeling that the pure online players will capture most of the online revenue. Yet, all the print players have their own online properties. What is there to say that they cannot capture a lion's share of the adex that will eventually shift online?
Lee: I think traditional print media companies currently are more focused on their print media for now. Yes they do have their own online properties but nonetheless it is still not their core income.
I wouldn’t say that they cannot capture a lion’s share of the adex when the time comes. But I believe they are still waiting for the right time, especially for the three factors I stated above, to come together.
DNA: In the likelihood that the pure-play Internet players do capture most of the online adex, do you believe that print players will acquire them to maintain their traditional dominance or do you think the print media landscape will be irrevocably changed?
Lee: I believe traditional print media companies will acquire the smaller and established Internet based media companies when the ‘wave of boom’ emerges. This will expedite their efforts to capture a larger market share in the digital world.
Just to illustrate the readiness of the traditional companies, Media Prima, our top pick, has already invested about RM73 million over the last three years to be ready for the shift to digital media. Their video portal Tonton is one of the most visited sites in Malaysia with more than two million registered users.
I also believe the group will target smaller but established Internet companies when the time comes.
The same also goes to Astro Malaysia Bhd and Media Chinese International Bhd. I believe they are ready to go aggressive when the time comes.
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