ASTRO (6399) : Astro Malaysia - Array of growth drivers
Target RM3.85 (Stock Rating: ADD)
The Edge Weekly reported that Astro planned to target international audiences by boosting its content monetisation strategy and selling more content and channels. We are not surprised by the news given that it has carried out this strategy with other channels in the past. Apart from that, we see the recent price hike for high-definition (HD) subscriber fees of RM5/month as earnings-accretive for the company. We maintain our FY15-17 EPS forecasts, Add rating and DCF-based target price of RM3.85 (WACC 8%). Astro is our top pick for the domestic media sector. Higher ARPU growth from value-added services, rising subscriber numbers and stronger contribution from home shopping are potential re-rating catalysts.
What Happened
According to an interview conducted by The Edge Weekly with Astro’s CEO, Dato’ Rohana Rozhan, Astro is actively planning to enhance its content monetisation strategy and sell more channels and content to regional markets. The report stated that Astro recently embarked on two new ventures – setting up a documentary channel known as SPARK Asia and partnering with Mexico’s TV Azteca SAB de CV to co-produce Asia-based telenovelas. This is part of its’ strategy to diversify earnings beyond pay TV subscription and leverage the group’s strength in content creation. The success of its content monetisation strategy is partly demonstrated by the strong growth in other service revenue, which grew from RM74.1m in 1HFY14 to RM167.7m in 1HFY15.
What We Think
We are not surprised by management’s decision to increase its content export given that this strategy has been deployed with other in-house channels, such as Astro Ria, Astro Prima and etc., in the past. However, we are encouraged that management is actively planning to enter more genres that will appeal to a wider viewership beyond neighbouring Asean countries. Apart from that, the recent price hike of RM5/month in HD subscriber fees is positive for Astro and we estimate it will bring about RM113m in additional revenue or 2-3% of the group’s TV revenue in FY16. The recent price increases are also in line with management guidance of stronger ARPU growth following the completion of its set-top box swap reinvestment strategy in FY14.
What You Should Do
Accumulate. In spite of sluggish consumer sentiment, we think Astro’s growth prospects are intact given its dominant market position, with 60% penetration, a defensive operating structure and the sticky nature of its subscribers.
Source: CIMB Daybreak - 08 December 2014
Target RM3.85 (Stock Rating: ADD)
The Edge Weekly reported that Astro planned to target international audiences by boosting its content monetisation strategy and selling more content and channels. We are not surprised by the news given that it has carried out this strategy with other channels in the past. Apart from that, we see the recent price hike for high-definition (HD) subscriber fees of RM5/month as earnings-accretive for the company. We maintain our FY15-17 EPS forecasts, Add rating and DCF-based target price of RM3.85 (WACC 8%). Astro is our top pick for the domestic media sector. Higher ARPU growth from value-added services, rising subscriber numbers and stronger contribution from home shopping are potential re-rating catalysts.
What Happened
According to an interview conducted by The Edge Weekly with Astro’s CEO, Dato’ Rohana Rozhan, Astro is actively planning to enhance its content monetisation strategy and sell more channels and content to regional markets. The report stated that Astro recently embarked on two new ventures – setting up a documentary channel known as SPARK Asia and partnering with Mexico’s TV Azteca SAB de CV to co-produce Asia-based telenovelas. This is part of its’ strategy to diversify earnings beyond pay TV subscription and leverage the group’s strength in content creation. The success of its content monetisation strategy is partly demonstrated by the strong growth in other service revenue, which grew from RM74.1m in 1HFY14 to RM167.7m in 1HFY15.
What We Think
We are not surprised by management’s decision to increase its content export given that this strategy has been deployed with other in-house channels, such as Astro Ria, Astro Prima and etc., in the past. However, we are encouraged that management is actively planning to enter more genres that will appeal to a wider viewership beyond neighbouring Asean countries. Apart from that, the recent price hike of RM5/month in HD subscriber fees is positive for Astro and we estimate it will bring about RM113m in additional revenue or 2-3% of the group’s TV revenue in FY16. The recent price increases are also in line with management guidance of stronger ARPU growth following the completion of its set-top box swap reinvestment strategy in FY14.
What You Should Do
Accumulate. In spite of sluggish consumer sentiment, we think Astro’s growth prospects are intact given its dominant market position, with 60% penetration, a defensive operating structure and the sticky nature of its subscribers.
Source: CIMB Daybreak - 08 December 2014
