KUALA LUMPUR (April 3): CIMB Research said today Astro Malaysia Holdings Bhd is its high-conviction top pick in the Malaysian media sector, premised on expectation of the pay-TV operator's year-on-year earnings growth in financial year ending Jan 31, 2020 and strong 2019 dividend yield of 6.2%.

CIMB analysts Kamarul Anwar and Mohd Shanaz Noor Azam wrote in a note today that CIMB, which maintained its neutral call on the media sector, has an add recommendation on Astro with a target price of RM1.75. At Bursa Malaysia, Astro shares rose one sen or 0.65% at 11:39am to RM1.56.

"We maintain our Neutral call on the Media sector following the news of the government's planned launch of an FTA (free-to-air) sports channel. We are encouraged by the efforts of the media companies under our coverage to evolve to fare better in the digital age. However, their digital initiatives will require gestation periods before hitting their earnings growth spurts. The competition lies in pirated media, which we believe is the sector's key downside risk. An upside risk is the government successfully clamping down on illegal streaming sites.

"We feel that the FTA sports channel would have minimal impact on the media sector, at best. We do not think one free sports channel would drive Astro subscribers to cut their subscriptions in droves. Astro has 15 sports channels — plus seven HD (high-definition) simulcasts — that hold the rights to the more popular sports leagues. Astro also has exclusive rights to the coveted Premier League brand until the 2021/22 season," the analysts said.

According to them, CIMB believes that the FTA sports channel will be constrained by budgetary issues in competing with Astro, a commercial entity, to bring as many top-tier sports brands to the FTA channel.

"Historically, RTM aired only selected live and delayed matches of a football tournament. At most, the FTA sports channel will serve those who cannot afford a pay-TV subscription. Also, we previously discussed that it is highly unlikely that the government will force media companies to cede their exclusive airing rights and share them with RTM," they said.