ASTRO MALAYSIA

RHB Research has upgraded its call on Astro Malaysia to “buy” from “hold” previously, on expectations of a firmer ringgit going forward, underpinned by stronger economic fundamentals.

Astro’s share price had fallen by 12% and underperformed the KLCI by 16% over the past three months over concerns of the weaker ringgit impacting content cost and the rising number of subscribers discontinuing their subscription to the service as a result of alternative viewing platforms.

“With our house expectations of a progressively firmer ringgit going forward, underpinned by stronger economic fundamentals and with 70% of its content cost hedged at RM4.10 to RM4.15, we think concerns are largely in the price,” it said.

The research house also said it believes that reports about Astro looking to acquire a payTV operator in India are misleading and inaccurate, and could present a buying opportunity. It was reported that Astro is in talks to acquire Reliance Digital TV (RDTV), the pay-TV arm of Reliance Communications (RCOM IN, NR) in India.

“While there has been no official confirmation of the news, we think a deal is most unlikely as the current listco (Astro) is involved exclusively in the Malaysian pay-TV business and was the product of a pre-IPO restructuring in 2011, which saw the previous listco’s (Astro All Asia Networks or AAAN) overseas asset in India (20%-owned Sun Direct TV) being spun off.

“We also believe it is likely to be value destructive for Astro and would raise questions over corporate governance, while triggering renewed concerns over management/shareholder execution,” it said.

It also noted that Sun Direct is part of AAAN and hence, the reports are likely to be incorrect.

On another matter, the research house said it was positive on Astro’s announcement of an MoU with Kumpulan Media Karangkraf (Karangkraf) to form a joint venture (JV) for the creation and monetisation of content verticals in the country and the Nusantara region.

“We view the tie-up positively as it would strengthen Astro’s expanding portfolio of Malay content offerings, leveraging on Karangkraf’s domain expertise and its close to four decades of publishing and media experience,” it said.