Astro Malaysia Holdings Bhd
(Nov 7, RM1.41)
Maintain buy with an unchanged target price (TP) of RM1.67: iQiyi video streaming will be officially launched outside of China for the first time via a partnership with Astro Malaysia Holdings Bhd. Under the partnership, Astro will be responsible for marketing, customer acquisition and sales around the iQiyi proposition in Malaysia. We are positive on this development as this allows both Astro and iQiyi to further penetrate the Malaysian and Chinese markets. The introduction of the partnership is timely to help Astro alleviate gradual deterioration in its paid subscriber base. We maintain our earnings forecasts as revenue contributions from the partnership are limited for now. We maintain our “buy” call with an unchanged TP of RM1.67 based on discounted cash flow valuation.

Astro and iQiyi have launched a new online video application, which marks the latter’s first app outside of China. This follows a content partnership inked between Astro and iQiyi in June. Astro has the exclusive rights to deliver iQiyi content on television, On Demand and over-the-top (OTT) in Malaysia, including the world’s first branded channel comprising iQiyi’s extensive slate of original content from dramas to variety shows and movies.

We understand that three shows will also be made available on the iQiyi app, where the platform can be accessed by over 100 million paid subscribers, namely: i) Miss Astro Chinese International Pageant; ii) Call Me Handsome; and iii) a web drama by XUAN.

In the longer term, we believe, Astro’s OTT viewership and downloads may be increased, riding on the partnership with iQiyi, and Astro has not discounted the possibility of further tie-ups with other streaming providers from other countries.

Astro continues to reap the benefit of cost rationalisation that has managed to improve its earnings in the absence of revenue growth. We expect Astro to maintain the lion’s share of paid-TV households in Malaysia in the long term on the back of its strength in vernacular content creation. Besides that, Astro also pays out generous dividends of 7.9%. — Hong Leong Investment Bank Research, Nov 7