Wednesday, August 5

Astro, Karangkraf collaboration positive in long-term — Analysts

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KUCHING: The collaboration between Astro Malaysia Holdings Bhd (Astro) and Kumpulan Media Karangkraf Sdn Bhd (Karangkraf) has been viewed by analysts as a long-term positive development for Astro.

As per Astro’s news release on its website,the group and Karangkraf have entered into a Memorandum of Understanding (MoU) to form a joint venture (JV) company for the creation and monetisation of content verticals in Malaysia and the Nusantara region.

The research arm of Public Investment Bank Bhd (PublicInvest Research) believed that the collaboration would be positive for Astro in the long-term as it would fit into the group’s focus to strengthen investments in signature vernacular and Asean IPs to further enhance its subscribers’ value and monetise its value-added services and contents.

“Although no immediate earnings contribution, we think that these investments are necessary for future growth,” PublicInvest Research said.

PublicInvest Research noted that according to group chief executive officer (CEO) Rohana Rozhan, Astro’s content creation expenditure for financial year 2017 (FY17) was about RM1.9 billion, of which 22 per cent was for Malay vernacular.

The research arm further noted that following the new venture, Astro aims to increase the group’s spending of Malay’s vernacular content to 33 per cent over a five-year period.

On another note, Astro announced that wholly-owned subsidiary MEASAT Broadcast Network Systems Sdn Bhd (MBNS) has received the acknowledgement receipt from the Securities Commission Malaysia (SC).

The group noted that this is pursuant to MBNS’ lodgement of the required information and documents relating to the medium term note (MTN) programme with the SC, under the guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework issued by the SC.

PublicInvest Research highlighted that following the issuance of RM3 billion MTN, Astro’s net debt/earnings before interest, tax, depreciation and amortisation (EBITDA) leverage level will be bumped up to 3.2-fold from the existing 1.5-fold.

“Though the leverage level appears to be high, we understand that the group is still able to comply with the requirement of maintaining a net debt/EBITDA of not exceeding four-fold,” it said.

All in, PublicInvest Research maintained its ‘outperform’ call on Astro with an unchanged target price of RM3.22 per share.