Astro Malaysia Holdings - Bags BPL Broadcast Rights

THE BUZZ

Astro Malaysia Holdings (Astro) announced that it has secured the rights to broadcast the Barclays Premier League (BPL) in Malaysia for the 2013-2016 season.

OUR TAKE

No surprise. We would have been most surprised if Astro did not to retain the rights given the cult following for this iconic content. Losing the BPL would significantly impact its pay-tv franchise given that over half its subscribers are on the sports package. While details are sketchy, it was reported by the press that the company forked out approximately RM1bn for the new season. We do not think the amount paid is exorbitant when compared to the GBP3bn that British Telecom (BT) and British Sky Broadcasting (BSkyB) paid for the same rights recently– which translates into a staggering GBP6.5m per match, a record 70% premium over the 2010/13 season.

Will the content be shared ? We are unsure if Astro would eventually be required to share some of the BPL content with free-to-air (FTA) and other pay-tv providers as part of the content guidelines issued by the Malaysian Communication and Multimedia Commission (MCMC). The guidelines, issued in May, stipulate that sports content of national significance (for which the BPL is one) be shared with other FTA providers which shall enjoy the first right of refusal for such content. In Singapore, Singtel bagged the rights on a non-exclusive basis and thus is not required to share with other operators as the cross-carriage ruling only applies to exclusive content.

No change to our forecast for now. Maintain BUY with FV at RM3.37. We expect Astro’s margins to remain under pressure from escalating content cost which accounts for some 30% of revenue and over 50% of operating cost. We do not rule out a potential subscription price hike (the last price hike was in 2009) to pass on some of the cost to viewers. For now, we are retaining our forecast pending the release of its quarterly results in October. Do note our FY13-FY15 estimates are 23%-30% below consensus estimates as we prefer to remain conservative. We are reiterating our BUY recommendation on the stock, with an unchanged FV of RM3.37 based on FCFF methodology (WACC: 8.45%, TG: 1.5%).

Source: OSK