Investment Highlights

• We maintain BUY on Astro Malaysia Holdings (Astro) with an unchanged DCF-derived fair value of RM1.83/share, (WACC 8%, terminal growth rate 0%), which includes a 3% premium for our 4-star ESG rating (Exhibit 1).

• Astro’s wholly-owned MEASAT Broadcast Network Systems (MBNS) has entered into collaborative agreements with Telekom Malaysia (TM) to provide Astro with broadband and content services via TM Wholesale.

• Based on our understanding, Astro will develop its own broadband through the collaboration, which is different from its current partnership with Maxis as a reseller. TM Wholesale will be providing a full suite of infrastructure and connectivity solutions that comprise wholesale high-speed broadband (HSBB) services, bandwidth, backhaul and internet access to Astro’s subscribers.

• With that, Astro will be able to extend its coverage to more areas via TM’s fibre network and strengthen video streaming efficiency for its current offerings.

• We are positive on the development as Astro would have better cost control on its future products and services. It is also unlocking new revenue streams, scaling its broadband service with content bundles, standalone broadband and other product lines which could be accretive to the group’s revenue.

• Together with Astro’s own Ulti box and ultra set-up boxes which require internet connectivity to enjoy features such as cloud recording, this move will provide a comprehensive solution to customers. To recap, bundle deals with Maxis and Allo broadband were well received, leading to an 89% YoY broadband-to-customer growth in 1HFY22.

• We estimate the earliest rollout of the new broadband and content services would be FY23F. We maintain our FY22–24F earnings forecast pending details on product launches from the management.

• We continue to like Astro for its: (i) strength in vernacular content and high household penetration rate of 74% in FY21; (ii) move to expand offerings by aggregating streaming services via OTT partnerships and launching of its own Sooka OTT; and (iii) attractive dividend yield of 7%–8%.

• Currently, the stock is trading at a FY22F PE of only 9x vs. a 3-year average of 12x.

Source: AmInvest Research - 30 Sept 2021