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Monday, November 4, 2013

CIMB Research sees Astro continuing to chalk up consistent earnings growth

Published: Monday November 4, 2013 MYT 8:30:00 AM 
Updated: Monday November 4, 2013 MYT 8:35:56 AM

KUALA LUMPUR: CIMB Equities Research has recommended investors accumulate shares of Astro Malaysia and raised the target price from RM3.44 to RM3.52.

It said on Monday it expects Astro to continue registering consistent earnings growth given its status as the biggest pay-TV operator. Its subscription-free service NJOI and IPTV have seen encouraging growth and this will help to boost earnings.

“Astro is confident that the announced price hike will have a net positive ARPU impact after factoring in potential downgrades and termination of service. We believe this is still true even after considering a potential rise in churns due to the GST and subsidy rollbacks,” it said.

CIMB Research said after factoring in the offsetting effect of a potential rise in the churn rate, it raise the FY14-16 net profit forecasts by 2%-3%.

It added the high definition set-top box swaps and Maxis’s IPTV products will help lift revenue and act as stock catalysts.

To recap, effective from Nov 24, 2013, Astro will raise the price of its family pack by RM2 a month and the sport package by RM6 a month. This is aimed at passing on the rise in content cost which has been escalating.

With the increase, the family pack will cost RM39.95 a month. This is the first price hike in two years. As a sweetener, all active subscribers to the sports pack before April next year will be entitled to watch all 64 FIFA World Cup (WC) 2014 matches live and in HD, with access to Astro On-The-Go (AOTG) on a complimentary basis.

“Our checks with the management reveal that the company is conservatively expecting a net positive impact of more than RM2 a month on its ARPU,” it said.

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