CIMB Research retains Add for Astro, TP RM1.75

Existing customers don

KUALA LUMPUR: CIMB Equities Research is maintaining its Add call for Astro Malaysian with an unchanged target price (TP) of RM1.75.

The research house said on Tuesday the pay-TV company has been able to stay ahead of the curve over the years by constantly evolving in a sector that is in a permanent state of flux.

“We believe it has the means and branding power to nurture its new initiatives to success. Our discounted cashflow-based TP of RM1.75 implies a CY19F enterprise value/earnings before interest, tax, depreciation and amortisation (EV/Ebitda) of 6.4 times, 30% lower than its historical three-year EV/Ebitda mean of nine times.

To recap, Astro was one of 44 companies that participated in the 11th CIMB Malaysia Corporate Day on Jan 3-4 and the only one from the media sector. 

“We are positive on the group’s measures to combat online piracy, which has been devaluing the group’s content proposition to consumers.

“The group was frank in highlighting the unpleasant truths it faces: i) it is losing premium subscribers to legal and illegal streaming services, which provide cheaper and almostlimitless content; and ii) complying with Malaysia’s censorship guidelines is costly, something video-streaming services do not need to bear because they are unregulated,” it said.

CIMB Research said Astro is taking refuge from the digital incursion by continuously investing in local content.

Astro said the content hours it generated were 3.5 times the amount that its biggest local competitor produced in 9MFY1/19. 

Of the 76% penetration rate that Astro commands, it said c.64% stay mainly for its local programming. Astro is also able to derive advertising and content reselling incomes, mitigating the effects of declining subscription revenue.

“Astro and Setia Haruman Technology, a unit of Tenaga Nasional, are conducting a trial to provide Astro and NJOI customers with bundled high-speed Internet subscription. 

“The entry price is 23% lower than Astro’s basic Internet Protocol Television’s (IPTV) package. We believe the new arrangement is priced attractively enough for NJOI users, giving Astro a window to upsell Astro subscriptions to NJOI customers (average revenue per user of c.RM2/month only now),” said the research house.