‘Buy’ call on Astro with RM1.36 target price
Astro Malaysia Holdings Sdn Bhd can expect to post a net profit of RM550 million if it can recoup all of its TV subscription revenue.
Maybank Investment Bank Bhd (Maybank IB) analyst Yin Shao Yang said banning the sale of TV boxes with pirated content was a positive turning point for Astro.
Following the ruling, Astro said it had contacted e-commerce and social media platforms to ask them to ban the sale of TV boxes containing pirated content.
“Astro is hoping that Malaysians
who terminated their accounts in favour of TV boxes would eventually re-subscribe to its services,” said Yin in a research report yesterday.
For every RM100 million TV subscription revenue that Astro recoups, it is estimated to accrete RM51 million to its core net profit estimate and 10 sen to its target price.
To recap, Astro’s TV subscription revenue dwindled by 26 per cent to RM3.2 billion years ago as more Malaysians bought TV boxes and terminated their Astro subscriptions.
Yin said Astro might also reinvest a third of the subscription revenue into content.
“Given that it costs Astro next to nothing to restore the subscriptions, we estimate the incremental earnings before interest taxes depreciation and amortisation will be RM67 million.”
He said the incremental core net profit would be RM51 million after deducting a 24 per cent corporate tax rate.
The research firm has maintainted its “buy” call on Astro with a discounted cash flowbased target price of RM1.36.