This article first appeared in The Edge Financial Daily, on September 29, 2015.

Astro Malaysia Holdings Bhd
(Sept 28, RM2.88)
Maintain add call with an unchanged target price (TP) of RM3.70: In an interview with The Edge weekly, Astro chief executive officer (CEO) Datuk Rohana Rozhan said the company is leveraging on its mobile platform to capture the future generation of subscribers, given the changing consumption habits of younger consumers. 

For example, Astro has completely revamped its Astro On The Go (AOTG) platform to enhance the user interface experience and launched a new feature to allow programmes for offline viewing via mobile devices. 

Rohana also highlighted that the main reason for entering the individual and smart device space is to address changes in technology and consumer needs. 

For example, as household members spend more time on their smart mobile devices individually, there will be more demand for content given that different individuals would want to watch different programmes. 

This is expected to help boost Astro’s average revenue per user (ARPU) to RM100 for the financial year ending Jan 31, 2016 (FY16) from RM99 in FY15, in line with our expectations. 

Astro aims to grow AOTG downloads to 2.5 million in FY16 with a weekly viewing time of 180 minutes (versus 1.4 million in FY15 with a weekly viewing time of 96 minutes). 

We think this is achievable given that Astro has about 4.6 million households with an average of four persons per household and Astro also estimated that an average Malaysian household consumes seven hours of content on a daily basis. 

Despite poor consumer sentiment following the implementation of the goods and services tax early this year, Astro’s home shopping has recorded RM75 million in revenue in the first half of FY16 (1HFY16), its first-half year of operations. 

Astro is targeting to grow its revenue to between RM150 million and RM200 million in FY16, in line with our expectations. 

We think this achievable given that Astro has a ready customer base from its 4.6 million households. 

We reiterate our “add” rating with an unchanged discounted cash flow-based TP of RM3.70.

Astro is our top pick in the Malaysian media sector due to its strong three-year earnings per share compound annual growth rate of 21% and dominant market position with a 65%  penetration. 

Rising ARPU growth from value-added services and stronger contributions from home shopping are potential catalysts. — CIMB Research, Sept 27