Astro shares drop on possible rising content cost

PETALING JAYA: Astro Malaysia Holdings Bhd shares fell to a six-year low yesterday, amid fears of potential rising content cost and impact from growing competition.

At 5pm yesterday, the pay-TV operator’s shares dropped 14 sen to RM2.16.

Hong Leong Investment Bank (HLIB) Research in a report last month said Astro expects its content cost to increase in its current financial year ending Jan 31, 2019, mainly due to the high number of sporting events.

These include major events such as the FIFA World Cup 2018, 2018 Asian Games and Gold Coast 2018 Commonwealth Games.

“The group expects the total content cost to come in at 36% of TV revenue in 2019. For non-heavy sports years, content cost would hover around 32% to 33% of TV revenue,” said HLIB Research.

The research house said 30% of Astro content comprises local content, while the remaining 70% consists of international and sports shows.

“The group is targeting to shift the focus to more vernacular content to achieve a more balanced combination of 50% local content and 50% international and sports content.”

HLIB Research said Astro has remained resilient amidst the soft consumer/business sentiment and managed to improve its advertising revenue despite the contraction in overall advertising expenditure (adex) revenue.

“However, we remain sceptical on Astro’s ability to regain subscription revenue as we opine that the pay-TV platform will remain challenging, moving forward.”

The research house said challenges could be in the form of an unexpected economic slowdown; threat of new players; high content costs; regulatory risks; shift to digital alternatives; and digital terrestrial television broadcast as substitution for consumers and advertisers.

The research house also said the pay-TV operator is facing poor adex growth due to weak consumer sentiment.

“Besides, the challenging business environment from aggressive shifts in the media platform from traditional to digital is leaving the company in a tough position.”

Separately, HLIB Research said the recent joint venture with Karangkraf Digital 360 would allow Astro to pursue the co-creation of a comprehensive line-up of content intellectual properties (IPs) across the Malaysian and Islamic verticals.

“With the ownership of these new IPs, Astro will be able to capture the rising demand for vernacular content across Nusantara.”

On the digital side, HLIB Research said Astro’s digital platform, EGG, will be expanding to another two countries this year – increasing its presences to eight countries.