With the recent launch of Astro’s addressable advertising alongside its fibre broadband service as a standalone product in May 2022, the group’s long term prospect seems to be improving. With a diversified revenue stream as well as an improved and more efficient advertising solution for clients, Astro is increasing its competitive advantage. Maintain BUY with an unchanged DCF based TP of RM1.34 (WACC: 8.6%, TG: 0%). In addition, Astro’s attractive dividend yield of 8.4% provides a solid share price downside support.

We Hosted a Meeting With Management Recently With the Following Key Takeaways:

Addressable advertising. Since addressable advertising was launched in Dec 2021, initial results from brand lift studies conducted have shown a general uplift across different advertisers with some specific customer segments exhibiting substantial increases in audience receptivity (i.e. brand recognition, propensity to buy). This is a boon for Astro as this was only done through its VOD channels (addressable advertising only launched on linear TV in Jun 2022) excluding its other advertising channels such as linear TV, radio, digital as well as on the ground live events. By combining all its advertising channels together with targeted advertising, the scale and reach available to advertisers are expected to increase significantly. Although current ad spend is increasingly going towards digital, we would argue that with this, more advertisers would return to traditional channels for advertising (linear TV) as they can also target specific audiences on linear TV now.

Fibre broadband. Astro launched its own fibre broadband service in Mar 2022 together with its TV content as a bundle, with fibre broadband being a standalone product in May 2022. We view this positively as it represents a new revenue stream for the group. Moreover, we opine that this would entice existing Astro content customers to take up its fibre broadband service as this not only would provide one bill convenience, but also additional cost savings from the bundles. As a result, this would then boost Astro’s future earnings prospects as content and broadband services would fuel each other’s growths and create strong stickiness.

First party data. With the inclusion of fibre broadband, Astro is now able to collect richer data from customers. When combined with Astro’s other services/products, Astro would be able to collect data on customer viewing habits (linear TV), browsing habits (publishing and digital sites), shopping habits (GoShop), consumer purchase habits (advertising) and now internet browsing habits as well. This will help Astro better understand its customers as well as predicting consumer trends moving forward. As time goes on, this data pool would continue to grow richer and as a media company, this would enable Astro to monetize this trove of data.

Forecast. Unchanged.

Maintain BUY with unchanged DCF-based TP of RM1.34 (WACC: 8.6%, TG: 0%). We continue to like Astro as we foresee further contributions coming from (i) further uptake of its new bundle packages (content and broadband fibre) as it provides more value and cost savings for customers; (ii) better value proposition of Astro’s content as it aims to become the #1 streaming aggregator in Malaysia with more streaming service partnerships in the pipeline; and (iii) further recovery in commercial subscriptions (which provides a better margin) as international travel resumes for Malaysia. In addition, Astro currently provides an attractive dividend yield of 8.4%.

Source: Hong Leong Investment Bank Research - 25 Jul 2022