- We maintain our HOLD recommendation on Astro Malaysia Holdings (Astro) with an unchanged fair value of RM3.10/share, based on a 10% discount to our DCF valuation.

- Astro Malaysia Holdings announced that it has entered into an agreement with GS Home Shopping Inc. (GSHS) to establish a home shopping business in Malaysia.

- Listed in 2000, Korea-based GSHS is a leading multimedia retailer in Korea that operates its business through home shopping TV programs, online shopping sites and direct mail catalogues. GSHS currently has presence in South Korea, China, Vietnam, Indonesia, Thailand, India and Turkey.

- A new company under the name of Astro GS Shop Sdn Bhd (AGSSB) will be incorporated with Astro’s subsidiary Astro Retail Venture (ARV) having a 60% stake, while GSHS owning the remaining 40%. AGSSB intends to operate its business through multiple platforms including TV shopping, Internet shopping and mobile shopping.

- We understand that the business model for AGSSB is to promote products from various vendors through dedicated Astro channels, and subsequently receive a percentage of gross sales of the products sold through AGSSB’s services.

- Astro will provide carriage and broadcast services to AGSSB for the purpose of broadcasting the home shopping TV channel, as well as studio and production facilities. GSHS, on the other hand, will provide its expertise and knowledge in the home shopping business.

- We are positive on this, as this could significantly broaden Astro’s revenue base by leveraging on its current customer base of 3.8mil homes, which provides a retail reach of ~17mil consumers across the country and Brunei.

- Furthermore, Astro will not be incurring any significant costs to implement the home shopping service as it will be available on both the NJOI and pay-TV subscription service with no additional investments in the current STBs or broadcast infrastructures. In addition, Astro’s existing production, broadcast facilities, and talent can be readily utilised to produce and broadcast the home shopping programming content.

- We maintain our numbers for now pending more information from management. The stock currently trades at a PE of 33x.

Source: AmeSecurities