Disney+ Hotstar streaming platform, a collaboration between Astro Malaysia Holdings Bhd and The Walt Disney Company, will be launched in Malaysia on June 1. Disney+ Hotstar will be available to Astro’s Movies Pack customers for an additional RM5 per month. We are positive on this development as this will (i) increase Astro’s subscription revenue from its Movies Pack customers; (ii) make its subscription package offerings more attractive; and (iii) add more content to its on-demand library. Maintain BUY with a slightly higher DCF-based TP of RM1.11 (WACC: 7.5%, TG: -1%) from RM1.10. We are encouraged by Astro’s efforts to partner with more streaming services which will provide more value to its service offerings as well as retaining its customer base. Besides that, Astro also pays out generous dividends, yielding 7.1%.

NEWSBREAK

The Edge reported that the Disney+ Hotstar streaming platform, a collaboration between Astro Malaysia Holdings Bhd and The Walt Disney Company, will be launched in Malaysia on June 1. Viewers can enjoy content from several providers including Disney, Pixar, Marvel, Star Wars and National Geographic. Consumers can subscribe directly to Disney+ Hotstar for RM54.90 for three months or through special packages with Astro. Disney+ Hotstar will be available to Astro’s Movies Pack customers for an additional RM5 per month, while its non-Movies Pack customers may access the streaming service via other bundles.

HLIB’s VIEW

A win-win scenario. Overall, we are positive on this development. Disney would be able to capitalize on Astro’s large customer base to penetrate into the Malaysia market; while for Astro, this partnership will (i) increase its subscription revenue from its Movies Pack customers (roughly one third of its subscriber base) via the additional RM5 charged per month; (ii) make its subscription package offerings more attractive with the addition of Disney+ Hotstar content; and (iii) add more content to its on-demand library. Given Astro’s large customer base, we believe Astro would be able to negotiate favourable terms for this partnership.

Long term benefit. The introduction of this partnership is in line with Astro’s strategy to be the leading streaming services aggregator. Over the long run, the diverse offering of content across different avenues (linear TV, Ultra and Ulti-Box, Astro Go app) as well as the availability of diverse streaming services content (iQiyi, HBO GO, Disney+ Hotstar) will propel Astro towards becoming a one-stop choice for content consumption. This partnership will also help Astro in retaining its current customer base.

Forecast. We have pencilled in a slightly higher ARPU as well as content cost. As a result, our earnings forecast for FY22 and FY23 increase marginally by 0.5% to RM512.8m and 1.0% to RM569.8m respectively.

Maintain BUY with a slightly higher DCF-based TP of RM1.11 (WACC: 7.5%, TG: -1%) from RM1.10. We are encouraged by Astro’s efforts to partner with more streaming services which will provide more value to its service offerings as well as help to retain its customer base. Besides that, Astro also pays out generous dividends, yielding 7.1%

Source: Hong Leong Investment Bank Research - 5 May 2021