We recently met with Malaysian Communications and Multimedia Commission (MCMC) Chief Digital Officer, Mr. Gerard Lim to learn about the development of digitalization within the media sector. Below are the key takeaways.

Delay for complete ASO. ASO (Analogue Switch Off) refers to the complete shutdown of analogue broadcasting services, marking a new era of technological advancement in Malaysia’s broadcasting field. MCMC guided that ASO will be done in stages before a complete shutdown on 31 Oct 2019. ASO in central and southern Malaysia were completed recently on 30 Sept 2019, while the northern and eastern regions will be on 14 Oct 2019, followed by Sabah and Sarawak on 31 Oct 2019.

Set top box (STB). There are two options to receive the DTT channel (i) use an old TV with HDMI/AV input that can be connected to the MYTV decoder with Type DVB T2 receiver; or (ii) use a new TV set (with the DTTV label) with integrated Digital Television (iDTV) that comes with digital TV tuner. For the STB, MYTV (official broadcaster to operate DTT network infrastructure) has distributed 2m free STBs to the recipients of the Bantuan Sara Hidup (BSH). Out of 2m distributed STBs, only 1.6m STBs were put on air and the rest were returned. Based on our channel checks, a STB is priced at RM110 on Lazada and offers 15 free-to-air (FTA) channels as well as six radio stations by several broadcasters, namely RTM, TV Al Hijrah, Bernama News channel and Media Prima.

Single TV audience measurement. Quantifying data collection technique is vital in aiding broadcasters and advertisers to gauge viewer response to their programmes and to plan accordingly. Currently, there are two types of audience management: (i) panel; and (ii) return part data (RPD). Upon the completion of ASO nationwide, MCMC will open a tender for single audience measurement for MYTV. MCMC is hoping the single audience measurement will attract more advertisers to participate on MYTV platform and hence improve TV broadcasting adex which is threatened by the changing preference to a digital platform.

FTA TV still alive. MCMC is hoping that the implementation of audience measurement will bring back the FTA glory days, where advertisers will again turn their interest on the FTA TV, capitalizing on more than 2m viewers once they are able to understand the viewers’ behaviours and start to monetise it. Before digital disruption, FTA TV adex in Malaysia was able to reach more than RM1bn a year; currently it hovers to around RM600m.

Pirated Android box. We understand MCMC will release a statement regarding measures to combat content piracy in early Oct 2019. Nevertheless, we expect no drastic action especially on the law amendment to ban android box sale, which is rampant on both offline and online channels.

Other digital initiatives. To further spur the development of media and telecommunication industries, MCMC introduced the National Fiberisation and Connectivity Plan (NFCP) and 5G development in Malaysia. The objective of NFCP is to “bridge the digital divide” between the rural and urban areas in Malaysia and aims to provide more equal opportunities which will be funded by the Universal Service Provision (USP) Fund.

Maintain UNDERWEIGHT. The government remains committed to transform the FTA TV, thus assisting the ailing adex. Nevertheless, we see a long road to recovery for the overall media sector amidst weakening adex on traditional platforms. We maintain our UNDERWEIGHT rating on the sector. Our top pick is Astro (BUY; TP: RM1.67).We expect Astro to maintain its lion share in the TV households on the back of its strength in the vernacular content creation. Besides that, Astro also pays out generous dividend which translates to a y

Source: Hong Leong Investment Bank Research - 10 Oct 2019

Source: Hong Leong Investment Bank Research - 10 Oct 2019

Source: Hong Leong Investment Bank Research - 10 Oct 2019