CGS-CIMB maintains ‘Add’ on Astro

Astro announces 13 new international content-oriented channels to join its distribution line-up


ASTRO Malaysia Holdings Bhd’s new business ventures are expected to reflect on its earnings, says CGS-CIMB Research in a report last week.

Analyst Kamarul Anwar and Mohd Shanaz Noor Azam kept ‘Add’ call with a target price of RM1.51 unchanged, on Astro’s announcement of 13 new international content-oriented channels joining its distribution line-up.

The 13 new TV channels are going to replace the 11 channels owned by The Walt Disney Co which will go off-air at the end of September this year.

CGS-CIMB views that Astro’s digital convergence strategy ought to narrow down its discount to its peers.

They added that with the streaming integration and international media giants’ backing against piracy, the research house is hopeful that an earnings resurgence is in sight.

“In our view, this is more a testament to the global media corporations relying on Astro to get their direct-to-consumer projects to work.

“On the surface, Astro’s move to replace the lost Disney-Fox channels seems like the pay TV operator is clutching at straws to keep its subscribers from fleeing. Yet, we see it as the Hollywood studios doing everything to bolster Astro’s content proposition,” the analysts said in a recent note.

Although Astro is getting more channels and streamers from Hollywood giants, the analysts noted that its content cost-to-TV revenue ratio should remain at 34%-37%.

“The group has said that the changes in its channel line-up and the addition of 15 subscription based video-on-demand services by end of the financial year 2021 (FY21)/FY23F will not cause the group’s content cost-to-TV revenue ratio to breach the self-imposed ceiling of 34%-37%.

“Hence, Astro has been getting more for less from the Hollywood studios over the years — considering that its content cost has remained stable since its October 2012 relisting,” they said.

The analysts further added that it is the international media giants that have more to lose if piracy upends their streaming gambit in Asia.

They also noted that the video streaming market surfeit and subscriber fatigue are slowing down their growth in the US, yet they continue to be mounted by high production costs to satisfy subscribers’ demand for content.

“We also believe Astro decided to replenish its channel count rather than taking this as an opportunity to cut its content costs further because there are still viewers who prefer to watch whatever is on TV without having to choose what to watch.

“This is why Netflix is testing out a linear channel in France,” the analysts said.

On Sept 15, Astro announced that it will continue to aggregate the best streaming services and at the same time refresh its linear channels in the Family, Movies, Variety and Learning packs, as well as Sports.

The new linear channels will include HBO Family, HBO Hits, SHOWCASE MOVIES, BBC Lifestyle, BBC Earth, Paramount Network, Lifetime and PRIMEtime which commenced on Sept 15.

This includes three new sports channels, namely Astro Arena 2, Astro SuperSport 5 and SPOTV which is commencing on Oct 1.

In addition, On Demand connected customers can expect two additional BBC offerings, BBC First and BBC Brit which will be launching mid-October, for more premium British dramas and entertainment programmes.

These channels are meant to make up for the 11 channels owned by The Walt Disney Co and Fox Networks Group Asia Pacific’s, which will bow out after Sept 30, as part of the media giant’s effort to reduce its exposure to linear broadcasting in international markets.

According to Astro, there will be something new for everyone with a rich mix of content being offered across the five packs.

As part of its continuous journey towards enhancing customer experience, the group is looking forward to providing more choices, value and flexibility in our packages for our customers.