Astro will be bringing Netflix's streaming services to Astro's platform. While no further details on the partnership was disclosed, we believe the partnership will likely benefit both Netflix and Astro. Netflix would be able to capitalize on Astro’s large customer base to penetrate in to the Malaysian market; while for Astro, this will further strengthen its position as the leading aggregator for streaming services and possibly uplift ARPU. Maintain BUY with an unchanged DCF-based TP of RM1.41 (WACC: 7.7%, TG: 0%).

NEWSBREAK

The Edge reported that Astro will be bringing Netflix's streaming services to Astro's platform. Astro said its customers will soon be able to enjoy seamless access to Netflix on their connected Ultra Boxes, first at launch, and on connected Ulti Boxes in the coming months. "With this partnership, Astro and Netflix customers in Malaysia can enjoy greater convenience by having Netflix with their Astro subscription, providing easy access for payment in a single bill, at the best value," it added.

HLIB’s VIEW

Quid pro quo. Currently, no further details on the partnership and pricing were disclosed. Customers who are interested can fill up a contact form on Astro’s website. The roll out date of this partnership is expected to take place in 4QCY21. To recap, below are Astro’s partnership arrangements with other streaming partners:

• HBO GO – free for Movie Pack customers, while non-Movie Pack customers can sign up at a cheaper rate of RM25 per month (vs. RM34.90 per month for non-Astro customers).
• Disney+ Hotstar – available through Movie Pack subscription; an additional RM5 was charged to Movie Pack customers effective 1 June 2021.
• iQiyi – Astro customers can subscribe to iQiyi VIP package at a cheaper rate, currently at RM6.90 (vs. RM8.90 for non-Astro customers). iQiyi is also available on Astro’s TV channel (first TV channel for iQiyi). We believe the partnership will likely benefit both Netflix and Astro. Netflix would be able to capitalize on Astro’s large customer base to penetrate in to the Malaysia market (74% penetration rate for Malaysian TV households); while for Astro, this will further strengthen its position as the leading aggregator for streaming services and possibly uplift ARPU.

Aggregator for streaming services proposition. Astro is targeting to launch another 2 to 3 streaming service partnerships for FY22. While we note that the overall partnership contribution to Astro’s revenue is still minimal at this juncture, we believe that this tactical move will benefit Astro in the long run especially when more streaming partnerships come on board. As the OTT market becomes crowded and consumers are spoiled with choices of different OTT apps, Astro’s proposition as a one stop entertainment solution will become appealing as consumers will be able to mix and match different entertainment options according to their preferences, at attractive prices. As the cord-cutting trend continues and the OTT market is growing, we opine that Astro’s move is timely to capitalize on the megatrends in the media industry.

Forecast. We maintain our forecasts pending more details on the partnership.

Maintain BUY with an unchanged DCF-based TP of RM1.41 (WACC: 7.7%, TG: 0%). We continue to like Astro as we view positively its proactive efforts in adapting to the changing landscape in the media sector as well as its attractive dividend yield at 6.4%.

Source: Hong Leong Investment Bank Research - 25 Jun 2021