Equity markets may enjoy a better second half to the year, suggest Media Partners Asia (MPA) analysts, as newsflow from election results in India and Indonesia, together with more robust macro indicators from China, Japan and Southeast Asia, renews investor confidence and in turn helps bolster media stocks. 

Some of the good news has been priced into some markets already, but investors still see future upside from current levels.

Take India, which rallied further post-elections, with MPA’s India stock average up 21% year-to-date (to July 22 close). While much expected upside from the new government’s July budget has failed to materialize, the impact on stocks has been negligible.

“India’s TV industry was expecting tax relief in import duties as it approaches its peak investment cycle to implement digitalization,” says MPA India VP Mihir Shah.

“In that context, the budget was a big disappointment but it has yet to have a negative impact on listed TV broadcasters and distribution companies, who continue to outperform the benchmark index.”

Indian broadcast group Network18, now fully acquired by Mukesh Ambani’s Reliance Industries, leads MPA’s stock winners, gaining 78% year-to-date, with Den (a cable operator), Balaji (a production company) and Jagran (a regional print business) also featuring high in the rankings.

A number of Indian DTH satellite companies are expected to IPO over the next 6-12 months, while some listed cable operators will likely dilute equity further as they raise additional capital to fund digitalization.

Indonesia Uptick

Indonesian media stocks have been fairly quiet for much of the year, with only a 4% gain in MPA’s Indonesia Media stock average. Activity should speed up post July elections, potentially benefiting Emtek in particular if it sustains ratings and ad sales.

Pay-TV operator MNC Sky Vision, which has shed 5% year-to-date, may also benefit if price competition stabilizes and the company can continue to drive subscriber additions and boost free cash. 

Outdoor and publishing averages have appreciated, but the MPA Internet stock average is down 6% year-to-date, with big sell-offs across China’s Sina, Tencent and Youku Tudou.

The Start Of A New Consolidation Cycle

Consolidation in US media’s pay-TV centric landscape – kickstarted with pending M&A in distribution between Comcast/Time Warner Cable and AT&T/DirecTV – is set to spread across big content conglomerates.

On July 16, Rupert Murdoch’s 21st Century Fox (21CF) offered US$85 per share for Time Warner, a US$75 billion valuation with a 22% premium.

The offer was rejected although Time Warner’s share price still rose ~17% the same day. 21CF’s shares fell, probably over concerns Murdoch may up the price to US$100 a share.

21CF would likely divest CNN, but HBO and Warner Brothers would be crown jewels for any buyer. Counter bids for Time Warner could come from Disney, Google or Verizon.

This article first appeared in Media Business Asia magazine, Q2 2014.