News

Astro has won the broadcast rights for the Barclays Premier League (BPL) in Malaysia for 3 seasons starting from season 2013/2014 – 2015/2016. All 380 matches of BPL will be available to be shown live on the Astro service.

News

What is the cost? According to news portal, the estimated cost for the BPL broadcasting rights is almost RM1bn for the three seasons, an increase from RM800m paid for the current three seasons ending 2012/2013. 

Although management is unable to comment further given the confidentiality agreement, we believe that the figure is inaccurate, nevertheless higher than the bid for the on-going three seasons. 

Financial impact? By assuming that the broadcasting rights costs a maximum of RM1bn (RM333m per year), this figure translates to ~29% and ~10% of FY12’s content cost and subscription revenue respectively. 

Based on the 2QFY13’s residential subscribers of 3.166m, this works out to a maximum monthly average cost per user of RM8.77, which is only 10% of the current monthly ARPU of RM91.80. Hence, given Astro’s track record, we believe that the management would have been prudent in their bidding, especially in the absence of major competitors that have both the financial muscle and outreach to broadcast the BPL matches. 

Strategic content We believe that it is important for Astro to retain the BPL rights as it will allow the company to continue on with their market dominance and lead to higher ARPU growth.

Risks

• Threat of new players;
• High content costs; and
• Regulatory risks.

Forecasts

Unchanged as we believe that the BPL content cost is within our estimates.

Rating

HOLD

Although there is more than 10% upside from our current target price, we are maintaining our HOLD call given the temporary high selling pressure (cut losses) from investors which were looking for a quick profit from the IPO. 

Positives: (1) Monopoly of pay-TV; (2) Higher subscriber base through stronger penetration rate and ARPU growth through new product offerings. 

Negatives: (1) Blocked from raising subscription rates; (2) High content costs.

Valuation

Maintain TP of RM3.16 based on DCF with a WACC of 7.3%.

Source: Hong Leong Investment Bank Research - 16 Nov 2012