PETALING JAYA: Astro Malaysia Holdings Bhd's targeted dividend payout ratio of not less than 75% of its annual profit was a move to stoke investor interest in view of slowing pay-television subscriber growth and rising competition, said media analysts.
An analyst also said the high targeted dividend payout ratio was only possible as Astro's overseas assets in Indonesia and India was not included in the re-listing.
“From what we understand, the overseas operations in India and Indonesia are bleeding, and we do not think they can contribute much to the company,” he said.
Another analyst pointed out that the company should be able to maintain its targeted dividend payout ratio in the next few years as long as it continued to capitalise on its dominant position in the pay-TV industry
The analyst said the company had a market penetration of about 50% of local TV households.
“Subscriber growth is levelling off, and there will be competition from the likes of digital cable TV network provider Asian Broadcasting Network (ABN),” said the analyst.
In Astro's draft prospectus, which was unveiled recently, the company stated it intended to adopt a policy of active capital management and targeted dividend payouts in each financial year beginning Feb 1, 2013.
“However, this high dividend payout ratio is attractive as we think Astro will remain the dominant player in the pay-TV industry in Malaysia in the long term,” said the analyst.
Astro is supported by about three million residential pay-TV users, making it the largest pay-TV operator in South-East Asia by subscriber base.
The draft prospectus for the sole satellite TV provider in Malaysia showed that its revenues were on a steady upward trend increasing from RM3.24bil in the financial year ended Jan 31 (FY10) to RM3.66bil in the next year and eventually grew to RM3.89bil in FY12.
Net profit, including minority interests, however, showed a more erratic trend initially, increasing from RM613.93mil in FY10 to RM827.48mil in FY11, then declining to RM629.62mil in FY12.
In its draft prospectus, Astro mentioned several strategies to maintain its leadership in the consumer media entertainment sector in Malaysia, notably to leverage on new technologies to develop products that enhance reach and service proposition.
The company also commands 53% share of the radio advertising expenditure for the three months ended Apr 30.
Meanwhile, Kenanga Research said in a recent report that Astro's earnings prospect would mainly rely on the country's household income as well as the pay TV penetration rate. The research unit noted that Astro recorded an average revenue per user (ARPU) of RM81.60, down from RM82.40 two years ago. “Based on the latest first quarter 2012 data from the Malaysian Communications and Multimedia Commision (MCMC), Malaysia has 6.7 million households, of which 46.4% have subscribed to pay TV services.”
OSK Research said in a recent report that risks which could impede Astro's growth moving forward included the emergence of other pay-TV operators in the form of a cable operator and a few Internet Protocol Television (IPTV) players which could pose a strong challenge.
The escalating cost of content, especially for sports programmes such as the popular Barclays Premier League, and slowing subscriber growth, which was projected at mid single-digit level going forward, could also hurt the company's growth.
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