News

Astro has formed a JV with GS Home Shopping Inc (GSHS) to establish a home shopping business in Malaysia. The JV structure will be 60% and 40% for Astro and GSHS respectively with a paid up capital of RM70m in tranches.

Comments

Proven track record… GSHS is the leading multimedia retailer in Korea by providing its services not only through TV but also IPTV and smart mobile devices. GSHS has successfully ventured overseas by partnering local media owners in India, Thailand, China, Vietnam, Indonesia and Turkey.

Evidently, its PATAMI has grown from KRW55.5bn (~RM172.5m) in 2008 to KRW122.0bn (~RM379.2m) in 2013 with a market cap of KRW1.75tr (~RM5.4bn).

Capitalising on leadership… We are POSITIVE on Astro’s latest collaboration. Home shopping through TV and online portals is still a vastly untapped market in Malaysia. As the incumbent Pay TV operator with 3.8m subscribers representing 55% of TV households, coupled with GSHS retailing expertise, we believe that Astro will be able to earn additional ancillary income from this venture, which will further boost its current ARPU of RM95.6/month (as of 3QFY14). It is also an opportune time given the latest fad for Korean-related entertainment.

How it will be done… Based on GSHS’ business model, there will be dedicated channels and also an online web portal for home shopping (see Figure #1). Likewise, the same model will also be replicated for Astro. Hence, we are expecting Astro to feature dedicated channels and a website for this purpose.

Risks

• Unexpected economic slowdown;
• Threat of new players;
• High content costs; and
• Regulatory risks.

Forecasts

Unchanged pending the success of the latest home shopping venture.

Rating

HOLD

Positives: (1) Monopoly of pay-TV; (2) Higher subscriber base through stronger penetration rate and ARPU growth through new product offerings; (3) Strong take-up in IPTV.

Negatives: (1) Blocked from raising subscription rates; (2) Subsidy cuts which reduces disposable income.

Valuation

TP maintained at RM3.02 based on DCF with an unchanged WACC of 7.3% and TG of 1.5%.

Source: Hong Leong Investment Bank Research - 12 Feb 2014