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Toll rate was not the only thing that went up on January 1. So did the advertising rates levied by The Star and The NSTP group of newspapers, which raised the rack rate by 4% to 15%.

Who will fare better in returns this year?

The Oriental Daily News ran a frontpage story on its business section January 9, quoting financial analysts' advisory. It says the big winner will be The Star while The NST will trail behind.

Analysts attributed this to the growing circulation and readership recorded by The Star which are both in a leading position. In terms of cost-per-thousand (CPM), The Star will command a better reach at a lower price.

The Star - 'BUY'

As such, AMMB advised that the hike in advertising rates will bring improved revenue for The Star, and has upgraded the counter from 'HOLD' to 'BUY', Oriental Daily reported.

With the advertising rate adjustment, The Star will be charging RM58 per column cm, equivalent to a growth of 3.6%. However, as the hike is applicable for advertisements inserted for Wednesday through Saturday, the effective average growth will be 3%.

Besides, the new ad rate will only take effect in Q2 2007 as there is a "price protection period" for advertisers' bookings placed before 2007. The protection period will expire in March.

Analysts predicted that The Star will achieve growth of 3% and 4%, respectively, for FY07 and FY08. It's net profit is expected to grow by 0.9% and 2.8%, or RM141 million and RM155 million, respectively.

As such, analysts have quoted RM3.36 as the fair price for the counter, according to Oriental Daily.

NSTP - 'HOLD'

On the other hand, ad rates for The NSTP group of newspapers has been raised ranging from 8% to 15%. The NST, Berita Harian are now charging RM40 per column cm while Harian Metro is charging RM26 per column cm.

Oriental Daily quoted analysts as saying that the hike in ad rate for The NST could not be justified.

For FY07 and FY08, analysts estimated that the group will register a net growth of 3.7% and 4.1%, or RM16.5 million and RM18.1 milliion, respectively.

In addition, analysts also down-rated NSTP's estimated group advertising sales, adjusting from the previous estimate of 3% growth to negative 6.5%.

Analysts attributed this to the substantial discounts and the erosion of market share, benefitting theSun.

Nevertheless, analysts have estimated a fair price of RM2.25 for the counter, with a recommendation for 'HOLD'.

It is interesting to note advertising expenditure (adspend) is closely associated with a nation's economic growth.

Happy investing!