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Astro’s Future Vision

MPA attended and presented at the Astro Malaysia Investor Day last month July 31, led by key Astro management including CEO Rohana Rozhan; COO Henry Tan; and CFO Shafiq Abdul Jabbar.

Astro’s always wanted to be much more than a pay-TV operator and its latest future plan has it embracing e-commerce, digital ad sales, regional OTT and of course local and regional contenty creation.

This is a good plan. However, Astro shareholders will need patience and the company itself plenty pf capital to invest if it wants to compete with global internet juggernauts and successfully scale its content and OTT businesses.

Investors will be encouraged by the growth of Astro’s Go Shop business, a key driver of Astro’s five-year plan. New business, led by Go Shop and including digital advertising, licensing and Tribe, will contribute 30% to Astro turnover by 2022. Go Shop itself will contribute almost 50% to the “other” revenue segment featured in our analysis below.

GoShop has ~ 1 mil. customers today and generated RM261 mil. in sales over FYE Jan. 2017 with management targeting growth to RM1.9 bil. in sales by 2022. Key catalysts for growth include: (1) Growing customer base with subs expected to reach 6 mil. by 2022; (2) Additional live slots and a higher margin product mix and (3) Regional expansion beyond Malaysia.

Other key drivers of new business include:

- Digital advertising with Astro planning to use its premium content and targeted offerings to drive traction. The company recently launched an independent digital marketing arm, Blaze Digital, offering digital solutions for marketers across its 21 digital brands and 11 independent digital publications. Astro’s total ad revenue base (TV, radio and digital) could grow 7% CAGR to ~RM 1 bil. pa by FYE Jan. 2022 as per internal targets with 44% from digital versus less than 5% currently.

- Tribe, the SVOD-based OTT that’s expanded across Southeast Asia through launches in Indonesia, Philippines and Singapore, is targeting revenue of RM392 mil. by FYE Jan. 2022. Subscriber or revenue details were not disclosed.

- Licensing with Astro looking to leverage its channels and IPs outside Malaysia, especially across Southeast Asia with new partnerships in Indonesia, Korea, Malaysia, Thailand and Vietnam. CJ, Turner and Malaysia’s Karangraf were cited as important strategic partners.

- Pay-TV. Astro lost more than 80,000 pay customers last year. Our key concerns include the continued negative impact of piracy and weak consumer sentiment. Astro is targeting a 1.8% CAGR growth in pay-TV subscription revenue over 2018-22, driven by premium local and Asian IP as well as sports, anchored to connected delivery. This is expected to boost ARPU growth along with retention of key sports franchises. Potential lower growth or declines in premiums subs will hurt Astro’s operating leverage especially as pay-TV sub fees today account for 78% of its turnover.

For inquiries relating to this viewpoint, contact MPA analysts Vivek Couto (vivek@media-partners-asia.com) and Aravind Venugopal (aravind@media-partners-asia.com).

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