Being the leading content and entertainment company in Malaysia, Astro serves 5.7 million homes, 8,300 enterprises, 17 million weekly radio listeners, 14 million digital monthly unique visitors (“MUV”) and 2.8 million shoppers across TV, radio, digital and commerce platform. In general, Astro derives its revenue mainly from three segments, namely television, radio and home-shopping. Segment-wise, TV accounted for 88% of the group’s PBT, radio 10% and home shopping 2%.

Although the higher content cost from sporting events and lower adex revenue as a result of weak consumer and business sentiment from the prolonged lockdown could potentially result in a softer 2QFY22 results (to be announced in Sept), we strongly believe that a recovery is on the horizon. Our optimism is underpinned by the relaxation of restrictions for fully vaccinated individuals which will bode well with increased consumer activities and adex spending. Moreover, Astro’s recent partnership with streaming services (Disney+ Hotstar, Netflix, HBO Go, iQiyi and more to come) and its growing home shopping segment may help to sustain its bottom line and lift its average revenue per user (ARPU).

HLIB reiterates a BUY rating on Astro (TP: RM1.41), justified by (i) its strong position in the over-the-top-media (OTT) market as the leading aggregator of streaming services; (ii) growing home shopping segment; (iii) penetration to the underserved millennial market through the launch of sooka; (iv) ongoing efforts to improve its products and user experience; and (v) undemanding 10.7x FY22E P/E (26% discount againts 5-years average P/E of 14.5), supported by an attractive 6.9% FY22E dividend yield.

Technically, Astro is forming a symmetrical triangle that could precede a breakout. A successful breakout above its upper trendlines RM1.11 would spur the prices higher to RM1.15-RM1.21 territory. Cut loss at RM1.00.

Source: Hong Leong Investment Bank Research - 19 Aug 2021