Tuesday 16 Jul 2024
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KUALA LUMPUR (June 23): Market talk is rife that Astro Malaysia will announce its partnership agreement with Netflix "soon", which The Edge understands could be as early as this week.

The Edge also understands that the actual service will not take place immediately after the signing announcement and will be available on the Astro box in a couple of months.

When contacted, Astro said it was not able to comment on the matter.

In a results call with analysts yesterday evening, Astro said that it would be signing another tie-up with a subscription-based video-on-demand (SVOD) service "soon" but did not share the timeline or details.

This latest partnership comes hot on the heels of Astro's partnership with the Walt Disney Co to launch the Disney+ Hotstar streaming platform in Malaysia earlier this month.

Additionally, Astro also launched its stand-alone subscription-based and advertising-supported streaming service, sooka earlier this month. Astro also has some content from streaming players US' HBO Go and China's iQIYI on its platform.

Maybank Investment Bank Research noted in a report today that the recent launches this month, coupled with news on Astro collaborating with another major international SVOD operator soon, will hopefully "help to ebb churn rates" which the local research house gathers remain relatively high. Maybank's Yin Shao Yang added that 1QFY22 TV subscription revenue eased 3% quarter-on-quarter.

Yin maintained his "buy" call and RM1.33 target price (TP) on the stock.

In a note today, CGS-CIMB research's Kamarul Anwar stated that the group is finally putting its digital convergence strategy into motion.

He opined that Astro "was only scratching the surface" with the launch of Disney+ Hotstar on June 1, and its stand-alone subscription-based and advertising-supported (or "freemium" in media industry speak) streaming service, sooka, on June 8.

"During its 1QFY22 results conference call, Astro said the announcement of another subscription-based video-on-demand (SVOD) service joining the Astro ecosystem should come soon. Apart from the content distribution side, Astro plans to launch its satellite-free decoders on Jul 6, 2021. The 'plug-and-play' convenience will not only make Astro's service more attractive for cord-nevers, in our view but should push down its installation costs in the long run," Kamarul added.

Kamarul has maintained his "add" call and RM1.51 TP on Astro.

UOB Kay Hian Research's Chloe Tan viewed in a note to clients that while the commercial terms of the agreements on the expected new content partnership were not disclosed, Astro believes that it will put them in a better position to forge more future partnerships and sustain market share moving forward.

"We believe this will pave the way for Astro to enrich its content offerings and become the master of content aggregator," said Tan, who has downgraded Astro to "hold" with a higher TP of RM1.20, from RM1.15.

For the first quarter ended April 30, 2021 (1QFY22), Astro's net profit mounted a 91% year-on-year (y-o-y) increase to RM141.25 million from RM73.84 million. The group's quarterly revenue increased by around 0.8% to RM1.06 billion, from RM1.05 billion. Earnings per share rose to 2.71 sen from 1.42 sen as a result.

The results were within analysts' expectations.

The higher net profit was on the back of an increase in its earnings before interest, tax, depreciation and amortisation (EBITDA), which increased by 13% y-o-y to RM374 million from RM330.2 million. Its EBITDA margin improved by 3.8 percentage points to 35.2% in 1QFY22, from 31.4% a year prior.

The higher EBITDA and EBITDA margin were due to lower content costs and impairment of receivables, offset by higher merchandise costs, marketing and distribution costs and licence, copyright and royalty fees, as a percentage of revenue. Lower net financing cost also boosted Astro's bottom line.

The group also declared a dividend of 1.5 sen for FY22, which will be payable on July 23. In contrast, it declared a dividend of one sen in the corresponding quarter last financial year.

This first interim dividend of 1.5 sen/share for the quarter represents 55% of net profit payout — which UOB KayHian's Tan said was "below expectations".

"Management remains committed to its 75% dividend payout policy, and this should normalise towards end-FY22," she added in her report.

She raised Astro's FY22-FY24 earnings forecasts by 3%/5%/5% respectively to pencil in revenue contributions from the subscription of the Disney+ Hotstar from Jun 21 onwards.

"This will be offset by lower adex revenue amid lockdown. Our earnings have reflected a 37% content cost as percentage of revenue for sporting event this year, versus 34% for non-event years," she said.

UOB Kay Hian's net profit forecasts for Astro are RM615 million, RM634 million and RM584 million for FY22, FY23 and FY24 respectively.

Shares in Astro were trading 4% or five sen lower at RM1.20 at the time of writing, valuing it at RM6.26 billion

Edited ByJoyce Goh
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