Astro Malaysia downgraded to Hold

KUALA LUMPUR: AmInvestment Bank Research downgraded Astro Malaysia Bhd to Hold from Buy with a lower fair value of RM1.81 per share based on a discount rate equivalent to its weighted average cost of capital (WACC) of 9% and a terminal growth rate of 0%. 

The research house said on Friday that it also cut its FY19-FY21 earnings forecast by 20-29% amid continued pressure on the pay-TV industry, due to content piracy and illegal TV set-top boxes and an increasingly competitive landscape for its over-the-top (OTT) offerings.

While there are several events expected to boost FY19 viewership and advertising expenditure (adex), it said it remained cautious on Astro due to several key risks.

Among the events expected to boost the group are the FIFA World Cup 2018, as Astro had the broadcast rights to all 64 of the scheduled matches, live and in HD on all screens. 

The group also offered the World Cup Channel Pass to non-Astro subscribers via Astro GO.

Another event is GE14, which saw record-breaking TV viewership on Astro Awani with 1.4mil and 9.2mil unique TV viewers on May 9 and May 19 respectively from its round-the-clock coverage of the election. 

With the 2018, 2019 English Premier League (EPL), the group expects to broadcast the EPL in Ultra HD in October. 

“In total, Astro plans to launch 4 Ultra HD channels for live sports and general entertainment,” it notes.

However, the research house remains cautious due to risks including higher content costs for the year despite stronger ringgit,persisting competition from OTT, iPTV and illegal TVs, and the ability of its commerce, OTT offerings and digital initiatives to offset the decline in its subscription earning.