KUALA LUMPUR: Integrated consumer media entertainment group Astro Malaysia Holdings Bhd is set to transmit higher, riding on its string of content offerings on its 171 satellite television channels, radio, digital media and growing subscribers.
JPMorgan said strong breadth of content backed by in-house channels, of which 69 are its own Astro branded channels and access to exclusive content have been key drivers for Asian pay TV operators, including Astro.
"In our view, Astro's content breadth, coupled with the size of its subscriber base relative to competition, makes it difficult for potential new entrants to challenge its dominance.
"We assume coverage with an 'overweight' rating (from 'neutral') and a share price target of RM3.70 from RM3," the financial services group said in a research note this week.
JPMorgan said its target return of 26.7 per cent is based on 8.4 per cent upside potential to 2014 estimate consensus Ebitda (earnings before interests, tax, depreciation and amortisation) forecasts and an 18.3 per cent expansion of earnings value multiples from current levels.
It said near-term earnings acceleration is likely to drive stock performance as Astro has been flat since its listing due to a significant rise in operating expenditure.
JPMorgan said there is a potential upside to average revenue per user (ARPU) with Astro's income-adjusted ARPU significantly lower than that of its peers in Thailand and Indonesia, indicating affordability at higher absolute levels.
"Astro has been successfully driving subscriber uptake of HD (high definition) content and we expect this trend to continue. We estimate the number of subscribers for HD content to rise to RM2.4 million in 2016 from 1.5 million currently.
It estimates an incremental RM20 per HD subscriber, which drives its ARPU forecast from RM103 in 2013 to RM117 in 2016.
Its free satellite TV NJOI, of which content up-sell and prepaid voucher take-up is rising, could become meaningful in three to five years.
"We estimate NJOI subscribers to potentially contribute more than RM100 million to earnings over the next five years.
"However, its key downside risks include rise in competitive intensity, increase in churn rates and adverse currency movement."