ASTRO (6399) - Astro Malaysia - Staying in orbit
Target RM3.80 (Stock Rating: ADD)
Our recent visit to Astro’s broadcasting centre left us still confident about the group’s prospects, which will be driven by higher ARPU growth, a potential recovery in pay-TV subscriber addition and better cost management. Astro’s consistently strong free cash flow could result in dividend upside in FY15 and in future years. We maintain our FY15-17 EPS forecasts and DCF-based target price of RM3.80 (WACC 8%). Astro is an Add and our top pick in the media sector. Rising ARPU growth from value-added services, higher licensing income and stronger home shopping contribution are potential catalysts.
What Happened
Together with 20 buy-side analysts and fund managers, we visited Astro’s broadcasting centre in Technology Park Malaysia, Bukit Jalil recently. The visit was hosted by Raymond Tan, Chief Investment Officer and started with a tour of Astro’s TV operation which includes several processes such as content censorship, transmission and broadcasting. We also visited the newly-launched home shopping studio and its radio operation. The site visit was followed by a meeting and Q&A session where we were joined by Liew Swee Lin, Chief Commercial Officer and Brian Lenz, Chief Innovation Officer.
What We Think
While there were no surprises, we were encouraged by management’s revelation of an improvement in pay-TV subscriber addition in 4QFY15 and a stable churn rate following the HD fee hike in Dec 14. Apart from that, we like the group’s strategy to become a platform-agnostic content provider in order to stay relevant and have better opportunities for content monetisation. Astro has also launched a subscription video on demand (SVOD) service that will begin offering thousands of hours of movies, TV shows, etc. as part of its strategy to embrace the growth of the online platform. We are also excited with the potential in home shopping because it provides a new source of revenue for the group while leveraging Astro’s 4.3m customers. Home shopping also signals the group’s foray into e-commerce following the launch of the “Go Shop” portal.
What You Should Do
Accumulate. In spite of sluggish consumer sentiment, we think that Astro’s growth prospects are intact due to its dominant market position with 62% penetration, a defensive operating structure and the sticky nature of its subscriber base.
Source: CIMB Daybreak - 11 February 2015
Target RM3.80 (Stock Rating: ADD)
Our recent visit to Astro’s broadcasting centre left us still confident about the group’s prospects, which will be driven by higher ARPU growth, a potential recovery in pay-TV subscriber addition and better cost management. Astro’s consistently strong free cash flow could result in dividend upside in FY15 and in future years. We maintain our FY15-17 EPS forecasts and DCF-based target price of RM3.80 (WACC 8%). Astro is an Add and our top pick in the media sector. Rising ARPU growth from value-added services, higher licensing income and stronger home shopping contribution are potential catalysts.
What Happened
Together with 20 buy-side analysts and fund managers, we visited Astro’s broadcasting centre in Technology Park Malaysia, Bukit Jalil recently. The visit was hosted by Raymond Tan, Chief Investment Officer and started with a tour of Astro’s TV operation which includes several processes such as content censorship, transmission and broadcasting. We also visited the newly-launched home shopping studio and its radio operation. The site visit was followed by a meeting and Q&A session where we were joined by Liew Swee Lin, Chief Commercial Officer and Brian Lenz, Chief Innovation Officer.
What We Think
While there were no surprises, we were encouraged by management’s revelation of an improvement in pay-TV subscriber addition in 4QFY15 and a stable churn rate following the HD fee hike in Dec 14. Apart from that, we like the group’s strategy to become a platform-agnostic content provider in order to stay relevant and have better opportunities for content monetisation. Astro has also launched a subscription video on demand (SVOD) service that will begin offering thousands of hours of movies, TV shows, etc. as part of its strategy to embrace the growth of the online platform. We are also excited with the potential in home shopping because it provides a new source of revenue for the group while leveraging Astro’s 4.3m customers. Home shopping also signals the group’s foray into e-commerce following the launch of the “Go Shop” portal.
What You Should Do
Accumulate. In spite of sluggish consumer sentiment, we think that Astro’s growth prospects are intact due to its dominant market position with 62% penetration, a defensive operating structure and the sticky nature of its subscriber base.
Source: CIMB Daybreak - 11 February 2015
