KUALA LUMPUR (Jan 6): CGS-CIMB Research opined that Astro Malaysia Holdings Bhd is an overlooked stock in the media space as the counter is currently trading at a 77% discount to the global pay-TV and streaming average CY21F enterprise value to its earnings before interest, taxes, depreciation and amortization (EV/EBITDA).

The local research house added that Astro’s CY21-22F yields of 8.3% to 8.6% backed by strong FCF generation is highest among media peers and companies under its coverage.

It projected Astro’s 2021 to 2022 dividend per share to come to 7.6 to 7.9 sen.

CGS-CIMB’s analysts Kamarul Anwar and Mohd Shanaz Noor Azam said in a report today they believe Astro's upcoming digital convergence strategy to lure "cordnevers" could be a significant transformation in its business model. 

“We expect Astro's own streaming service and new streaming partner to come on board in 2021. An in-house broadband service may also be in the works,” they pointed out. 

The analysts added that Astro is considering entering the high-speed broadband market under its own brand. This is in view of the rising importance of the Internet for content provision services. 

“Unlike the pay-TV market, fixed broadband is far from reaching a saturation point; its penetration rate in Malaysia is only 34.5%. Astro’s plan to have OTT and broadband in its ecosystem is similar to what Sky Ltd (Unlisted), and Comcast Inc have done,” they said.

To provide bundled pay-TV and home broadband services currently, Astro has partnerships with Maxis and TIME dotCom.

The analysts also noted that Astro had said it could be announcing "over the next few months" the addition of another subscription-based video-on-demand (SVOD) partner into its fold, which currently includes HBO GO Asia and iQIYI.

“This would effectively turn its Ultra Box into a ‘legal’ grey-market streaming box, in our view,” they said.

The analysts believe the revenue-sharing method for the SVOD partnerships could yield revenue/subscriber that is far higher than the pay-TV model’s about RM2 per channel.

The analysts see Astro’s upcoming digital convergence strategy as the growth story that has eluded Astro since its re-listing, as it looks to win back lapsed subscribers and a new generation of viewers.

CGS-CIMB Research has an "add" call and a target price of RM1.18 on the stock. 

At the time of writing, Astro was unchanged at 91 sen, valuing the group at RM4.75 billion.