by LYDIA NATHAN / pic by BLOOMBERG
ASTRO Malaysia Holdings Bhd’s partnership with The Walt Disney Co to bring in the Disney+ Hotstar streaming platform is viewed broadly as a “win-win” move by equity analysts.
Hong Leong Investment Bank Bhd (HLIB Research) analyst Syifaa’ Mahsuri Ismail said the collaboration allows Disney to capitalise Astro’s large customer base, while Astro could benefit from increased subscription revenue from its Movie Packs customers and add more content to its on-demand library.
“The introduction of this partnership is in line with Astro’s strategy to be the leading streaming services aggregator. Over the long run, the diverse offering of content across different avenues and the availability of diverse streaming services content will propel Astro towards becoming a one-stop choice for content consumption,” the analyst stated in a note yesterday.
HLIB Research maintained its ‘Buy’ call on Astro with a slightly higher discounted cashflow-based target price of RM1.11 from RM1.10 previously.
“We are encouraged by Astro’s efforts to partner more streaming services which will provide more value to its service offerings and help retain its customer base. Astro also pays out generous dividends, yielding 7.1%,” she said.
MIDF Amanah Investment Bank Bhd (MIDF Research), in a separate note, said the partnership shows Astro is on a clear path to becoming a subscription-based video-on-demand aggregator.
“Although there is a choice to choose either Disney+ Hotstar as a standalone service or together with Astro, we think with the various offerings in Astro’s package, it would be an attractive option to customers. We opine that Astro’s plan to be a super-aggregator would bode well with the group’s subscription revenue, average revenue per unit (ARPU) and earnings,” it said.
It further noted the content cost saved from Disney’s TV shutdown can be redirected to invest in its super-aggregator streaming services platform and future digital content initiatives.
MIDF Research has a ‘Buy’ call on Astro and has revised its earnings forecasts for financial year 2022 (FY22), FY23 and FY24 upwards by 7.9%, 17.5% and 18.5% to RM639.7 million, RM722.3 million and RM747.4 million respectively.
Public Investment Bank Bhd analyst Eltricia Foong believes Astro’s content cost could rise despite a potential increase in ARPU.
“We see limited earnings upside from this partnership with Disney+ Hotstar as we believe the content cost could go up, though ARPU may improve on the additional cost to subscribers to sign up under the Movies Pack,” Foong said.
She also noted the possibility of existing Astro subscribers opting for direct subscriptions to Disney+ Hotstar as the monthly rate looks attractive cannot be ruled out either for now.
In lieu of that, the investment bank’s earnings forecast for Astro will remain unchanged at this juncture and will maintain its ‘Outperform’ rating.
Astro’s shares ended three sen or 2.83% lower at RM1.03 yesterday, valuing the company at RM5.37 billion.