Astro Malaysia Holdings Bhd
(Aug 16, RM1.79)
Maintain hold with an unchanged target price (TP) of RM2.00: Astro will commence commercial broadcasting in ultra high definition (UHD) in October 2018. We gather that this is an effort to recreate the success that Astro had with high definition (HD) content, which saw average revenue per user (Arpu) surging from RM82 in financial year 2010 (FY10) to RM100 today.
While we are encouraged that Astro is evolving with the times, we are unsure how well UHD content will be taken up, given the competitive operating environment.
Astro launched UHD content on Sunday, with the trial broadcast of the Liverpool versus West Ham and Arsenal versus Manchester City Barclays Premier League matches in UHD. Astro will commence commercial broadcasting in UHD in October 2018 (starting with Food and Beverage [F&B] outlets) and launch three UHD channels broadcasting live sports and general entertainment. UHD broadcasts have 3,840 x 2,160 pixels resolution which is four times that of full HD broadcasts at 1,920 x 1,080 pixels resolution.
Currently, about half of Astro’s Pay-TV subscribers take up HD content. We understand that the Arpu for Pay-TV subscribers who take up HD content is more than RM100 while the Arpu for Pay-TV subscribers who do not is RM75. As more Pay-TV subscribers take up HD content, Arpu trends higher.
All else being equal, we estimate that every RM1 increase in Arpu will accrete RM30 million or 4%-5% to our earnings estimates.
Astro plans to offer UHD content to SuperPack subscribers who yield Arpu of more than RM140 at no extra cost to them to retain and attract new SuperPack subscribers.
With intense competition from Android TV boxes, it remains to be seen how well UHD content will be taken up.
Astro will also have to swap out set-top-boxes, lease more satellite transponders and incur more content cost. — Maybank IB Research, Aug 14