Thursday, 13 December 2012

Astro Malaysia Holdings - Ahead of Asian Boroadcasting Network HOLD

- We re-affirm our HOLD recommendation on Astro Holdings Malaysia, with an unchanged fair value of RM2.89/share, based on a 10% discount to our DCF value.

- It has been reported in local dailies that Asian Broadcasting Network (ABN) Media Group, a new digital cable pay-TV company, is looking at achieving an 80% penetration of the 6mil households in 5 years’ times and to have 100% coverage in the country as well as offering satellite services only to the rural areas.

- ABN’s trial offering had begun in June for selected areas. The basic package is RM29.99 per month for 50 channels. This comprises information, education, entertainment games and radio channels. Furthermore, the rollout of video-on-demand and sport packages will be made available soon and should not exceed RM100 a month. The set-up box and installation charges will be waived in the initial stage.

- ABN is positioned as a low-cost pay-TV provider – the same set of customers for Astro’s NJOI. Fortunately for Astro, the NJOI services – a subscription free DTH TV offering 18 TV channels and 20 radio stations – target non-subscribers and the low-income segment. A onetime payment of RM388 is borne by NJOI subscribers for equipment and installation charges. Thereafter, subscribers may view additional content on a pre-paid basis at RM20 for 15 days.

- Having said, ABN’s rollout of fibre-to-home is time consuming given that it is physically laying fibre to homes instead of leveraging on Telekom Malaysia’s HSSB network. As such, ABN is looking at offering TV services via the internet such as over-the-top services which can be available as early as next year. Additionally, we understand that ABN’s goal is to be a triple-play service provider.

- Positively, the introduction of B.yond IPTV (in partnership with TIME) in FY11 has transformed Astro into a multi-platform Pay-TV operator and a triple-play service. The collaboration with Maxis for a triple-play service (voice, video, broadband) is targeted for launch in April next year. This will be using TM-owned fibre, powered by Maxis. Two months thereafter, Astro On-the-Go (OTG) bundling, an over-the-top service, with Maxis mobile and broadband services, are expected to be launched. OTG was introduced this year with a total of 19 channels and nine radio channels. 

- Despite a more challenging outlook given ABN’s entrance and existing HYPP TV by TM, we view that Astro has a better footing ahead, underpinned by readily-available products and services – NJOI, over-the-top and IPTV – which can further drive penetration in the Pay-TV segment. This is also driven by Astro’s strong franchise value because of superiority in content portfolio. More importantly, we believe that competitors will be constrained by the lack of quality content and limited network coverage. 

Source: AmeSecurities 

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