KUCHING: Astro Malaysia Holdings Bhd’s (Astro) sluggish advertisement expenditure (adex) is set to see improvements in financial year 2019 (FY19) due to two notable sporting events this year, the PyeongChang 2018 Winter Olympics and the 2018 FIFA World Cup.
In a company update, AmInvestment Bank Bhd (AmInvestment Bank) guided that they believed the two major sporting events would uplift Astro’s adex significantly because the events are far more enthralling compared to the notable events in 2017 – SEA Games and Merdeka Celebration.
“From our historical checks, Astro’s TV adex grew by 7 per cent year over year (y-o-y) and 39 per cent quarter over quarter (q-o-q) during the quarter that the 2014 FIFA World Cup was held.
“Similarly, the group’s radix expanded by 8 per cent y-o-y and 35 per cent q-o-q,” said the bank.
With those figures in mind, AmInvestment Bank is projecting that Astro will see a 3 per cent growth in TV adex and a 7 per cent growth in radex in FY19.
Collectively, the two income streams account for circa 12 per cent of Astro’s revenue in FY17.
Apart from just adex and radex, the bank also guided that they believe the two sporting events will incentivise more user spending on Astro’s non-subscription based satellite TV – Astro NJOI.
“Currently, average revenue per user (ARPU) of the platform is approximately RM2 per month.
For NJOI users who wish to tune in to FIFA-streaming channels, Astro Supersport and Supersport 2, the price is RM5.30 for 3 days for each channel, and RM21.20 for 30 days for each channel,” detailed the bank.
The analogue switch-off (ASO) which is scheduled to be implemented in June 2018 will also lend support NJOI’s household penetration and revenue increase as post-ASO, video content will only be transmitted digitally which requires households to have either a decoder/set-top box (STB) or an integrated digital television (iDTV) for content reception.
Households who are non-BR1M recipient will be ineligible for a complimentary MYTV decoder/STB and would likely end up purchasing one from NJOI as its offers the highest number of free TV and radio channels among its peers – leading to higher revenue and household penetration post-ASO.
With that in mind, the post-ASO effects will also help broaden the addressable market of Astro’s home shopping business, Go Shop and will bode well for the group’s pay-TV subscriber base as the upgrade process from freemium to premium service is seamless.
Overall, Astro’s prospects are looking to be improving for FY19 and alongside strengthening operational efficiencies from the group’s digitalisation initiatives, AmInvestment Bank is now optimistic of the group’s long-term prospects.
To reflect this new-found optimism, the bank has upgraded their call on the stock from ‘hold’ to ‘buy’ with a higher fair value of RM3.10, derived from a discounted cash flow with a discount rate of 8 per cent and terminal growth rate of 2 per cent.