Highlights

• We attended Astro’s investor day yesterday. The event was led by Dato’ Rohana Rozhan Astro’s CEO and her key management team, Henry Tan (COO), Shafiq Abdul Jabbar (CFO), and others. The management shared Astro’s challenges and strategies moving forward and we walked away feeling positive on the group’s transformation plan.
• Astro also invited Media Partners Asia (MPA) a leading independent consulting and research provider, to share with the crowd on the overall media trend moving forward. MPA mentioned that Astro is well positioned across key customer products and segments.
• Astro is rapidly scaling its digital ventures via:- (i) Its regional OTT streaming, TRIBE is leveraging on locally produced content to grow presence within ASEAN. Local intellectual properties (IPs) gained viewership to 5.2m viewers from 0.9m viewers in 2013. TRIBE now has existence in 3 different countries (Indonesia, Philippines, and Singapore) and the group expects to expand to other countries within ASEAN in FY18. Astro targets TRIBE to contribute RM392m to the group’s revenue by 2022. (ii) GoShop has 1m customers and generated revenue of RM261m (FY17). This segment is targeting to achieve RM1.9bn sales by 2022. The group believes this can be easily achieved as they are now serving at least 21m individuals on all screens. (iii) E-sports (EGG), the first of a kind 24/7 e-sports channel in South East Asia. EGG now has presence in 6 countries and is entering 2 other countries by FY18.
• Astro is not leaving the traditional business behind. The group is launching 2 new radio stations in Sept 2017. Astro believes it will boost new brand presence and reach. We opine that the traditional platform still matters to a certain extent as it remains as a trusted source for information.
• We are positive on the group’s transformation plan as it adapts to the ever changing media platform. Assuming its targets are reached, the group will eventually reduce its earnings volatility from traditional revenues sources.

Risks

• (1) Unexpected economic slowdown; (2) Threat of new players; (3) High content costs; (4) Regulatory risks; (5) Shift to digital alternatives; and (6) DTTB as substitution for consumers and advertisers.

Forecasts

• Maintained.

Rating

BUY (↔)

• We like Astro due to its monopoly in the pay-TV segment, increasing penetration in the local households, innovative home shopping business, its move towards gaining regional eyeballs and ability to attract adex despite the overall soft consumer and business sentiment.

Valuation

• We maintain BUY with an unchanged TP of RM2.98 based on DCF valuation.

Source: Hong Leong Investment Bank Research - 01 Aug 2017