Astro’s earnings momentum to be driven by improving cost structure

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KUCHING: Astro Malaysia Holdings Bhd’s (Astro) outlook has garnered optimism, with the group’s earnings momentum projected to be primarily driven by its improving cost structure.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) is optimistic on the outlook of Astro as the group continued to show positive progress on its cost management plan while pursuing profitability through its multitude of platforms.

“We believe the earnings momentum of the group to be primarily driven by its improving cost structure going forward,” MIDF Research said.

“Meanwhile, the pay-TV average revenue per user (ARPU) was also managed to stay around RM100 which we posit to be mainly through the higher consumption from its On Demand video on demand (VOD), over-the-top (OTT) platforms such as Astro Go and NJOI.”

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the media industry appears to be undergoing structural changes, where competition arises not just from piracy but also pressures from international OTT platforms (Apple TV, Netflix and Disney).

“To combat this, management maintains focus towards vernacular content to cater to local flavors, strategic tieups with local telco players to enable cross-selling opportunities and enhancing seamless experience that customers could enjoy with its offerings (exclusive rewards and privileges),” Kenanga Research said.

“Apart from these, the group continues its effort on cost optimisation initiatives, which include digitalisation of processes and content cost renegotiation.

“All in, we concur with management’s focus to strengthen its core business and also their on-going cost optimisation efforts.”

Meanwhile, MIDF Research opined that Astro’ recent launch of the group’s broadband content bundling with Maxis is a positive development as it could reach out to customers in a more efficient manner.

“The increase in the number of connected set-top box also indicates that consumers are possibly opting for Astro’s attractive and premium contents, for example HBO Go and iQIYI, ahead of the analogue-switch off possibly in the fourth quarter of current year 2019 (4QCY19) or year 2020 which could bode well for Astro in earnings,” it added.