This article first appeared in The Edge Financial Daily on February 8, 2019
KUALA LUMPUR: The government’s plan to ban Android TV boxes would be a positive catalyst to the lacklustre media sector, especially for Astro Malaysia Holdings Bhd, given the continued effect of digital disruption, says Hong Leong Investment Bank Research (HLIB).
It was recently reported that the Malaysian Communication and Multimedia Commission (MCMC), together with the Domestic Trade and Consumer Affairs Ministry, is considering banning the sale of Android set-top boxes (STBs) in Malaysia, mirroring Singapore’s similar move last month.
Apart from that, both bodies are cracking down on unauthorised websites that offer illegal streaming.
In a note yesterday, HLIB said the sales of Android STBs have been growing rapidly in the last two to three years as a cheaper streaming alternative, which has hampered Pay-TV’s development in Malaysia.
“In Malaysia, Astro appears to be the most impacted player with the rapid sale of Android STBs, as evident by its declining premium subscribers in the past three years. However, we note that Astro has managed to slowdown the subscriber loss with NJOI,” it said.
Should the ban materialise, HLIB said Astro would be a beneficiary as this could possibly put a halt to — or at least slow down — its declining premium subscriber base and lift its average revenue per user, which is currently at RM99.90.
However, ban or no ban, Astro would still face competition from legal streaming platforms like Netflix.
In the meantime, another piece of good news for Astro would be Telekom Malaysia Bhd’s (TM’s) announcement that their latest Unifi package would not be bundled with Unifi TV subscription, due to changing consumer trends.
“We view the news as a positive for Astro, as this could assist Astro to expand their subscriber base. Astro controlled 77% market share of Pay-TV market in Malaysia and the rest is controlled by TM through Unifi TV,” HLIB said.
But following the recent surge in Astro share price, HLIB has downgraded Astro from “buy” to “hold”, with an unchanged target price of RM1.70. HLIB is also keeping the media sector on “underweight”.
“Nevertheless, Astro’s earnings prospect remain intact on the back of its stable advertising expenditure outlook and coupled with generous dividend payment of 5% yield,” it added.
Astro shares settled unchanged at RM1.66 yesterday after 1.36 million shares were done, with a market capitalisation of RM8.76 billion.