ASTRO MALAYSIA HOLDINGS BHD
By CGSCIMB Add Target price: RM2.70
THE news that Communications and Multimedia Minister Gobind Singh Deo would like to “liberalise” Malaysia’s pay-TV space is not a surprise to CGSCIMB, nor is it likely to have a significant impact on Astro.
The Malaysian Reserve’s report quoted the minister as saying that this would create a healthier market and prompt broadcasters to improve their services.
The minister would also sit down with Astro’s top management and discuss customers’ concerns – which include subscription pricing.
“There are 22 content application service providers (CASP) eligible to apply for satellite broadcasting – with Ansa Broadcast Sdn Bhd reportedly hoping to enter the field.
Astro has faced mounting competition since its inception due to pirated content, and Internet streaming has opened up access to global content providers,” it said.
“Being a satellite TV broadcaster is financially consuming, and one has to endure a long gestation period.
“Compared with over-the-top (OTT) Internet streaming content providers, satellite broadcasting is regulated and requires heavy investments in infrastructure,” CGSCIMB added.
The research house said that Astro’s strength is in content ownership.
It noted that any aspiring pay-TV broadcaster would face an uphill battle catching up in terms of building up its infrastructure and subscriber base.
“Content costs tend to perennially escalate; Astro spent RM1.6bil on content in FY1/18. Sanctity of commercial agreements should also preclude the Pakatan Harapan government from breaking up Astro’s existing exclusive deals with content providers – at least not without fair compensation,” it said.
According to CGSCIMB, there is one minor risk that if sharing popular content is the way forward that it foresees a possibility that the government may instruct Astro to share some of its popular content rights with another broadcaster.
This was seen in Singapore, where Singapore Telecommunications Ltd (SingTel) was forced to cede its exclusive rights to broadcast the Premier League and jointly air the programme with StarHub Ltd, it said.
“We see potential risk of losing some premium-tier subscribers but this should not be a major deal breaker for now,” it said.
“In our view, more pay-TV providers in Malaysia would not disrupt Astro’s business in the short-term. Astro’s main risk, as it has always been, comes from the ubiquitous piracy market.
Potential catalysts are a pick-up in consumer sentiment and higher dividend payout. Maintain “add” with an unchanged discounted cash flow based RM2.70 target price,” it added.