Astro Malaysia slides as web streaming is demanding

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Investors seem to prepare for the tougher times in the future of Astro Malaysia Holdings Bhd as the media broadcasting scene continues to change.

Besides the shifting of the media consumption habits, there is also a thought that the satellite broadcasting business is all capital inclusive in nature, particularly from the content costs and the need to continue investments in broadcasting technology.

The Star reported that against this background, the company’s shares in the past week has dropped to nearly its lowest point since it was listed in 2012 with its shares closed at RM2.18 in Friday, down four sen after hitting RM2.16 on Tuesday.

There are yet exact or official statistics available on how rapid people are moving from paying for satellite television subscription and opting for a streaming service over the web.

A report in 2017 stated that there are an estimated of 66,000 active streaming subscribers for Netflix in Malaysia and this number could grow up to 336,000 by the year of 2020, a statistics from portal Statista reported.

However, there is no public information that available on another major online streaming provider, Iflix, but the company which is also a cheaper alternative to Netflix had reported that it has successfully raised even more finance in March last year.

AmInvestment Bank Research’s analyst told StarBizWeek that the net additions of subscribers for Astro are still sustaining now.

“It is also cushioned given that high-speed Internet subscription is still low in the rural areas. Streaming services is a threat to Astro but the price of the stock looks undemanding now at about 15 times price to earnings ratio (PER),” the analyst added.

Though streaming providers such as Netflix may be gaining all the attention now, there are also concerns that it is starting to pay too much for content.

Netflix’s content chief Ted Sarandos was previously reported saying that the company is projected to spend US$7 billion to US$8 billion on original content for this year.

This figure is even higher than the US$6 billion that was spent in 2017 and US$5 billion in 2016.

Analysts said that while content costs are seemingly high for Netflix, it has the advantage of repaying these costs over a longer period of time on the back of its nature of distribution to the end user through the video-on-demand channel.

Another analyst opined that some of the advantages that Astro has on its close streaming providers are the availability of its real-time news channels as well as its sports channels.

“The cord-cutting trend as seen in the US could happen here as well but there is still noticeable demand for reliable sports broadcasting channels that provide live streaming.

“These are not readily available elsewhere. Also, the decision for the government to impose the goods and services tax on online streaming providers would help level competition to a certain extent in this space,” said an analyst.

Meanwhile, Affin Hwang Capital Research’s analyst Nadia Aquidah Subhan tells StarBizWeek that Astro’s competitive advantage for on-demand television viewing is in its content which is their in-house productions.

“Their content library is huge and what attracts viewers is their good quality vernacular content. Astro’s vast array of content still appeals to the masses and we believe Astro will still be able to leverage on its strong content to dominate the pay-television space in Malaysia,” she says.

To recap, according to its financial results for its latest reported third quarter ended Oct 31, 2017, Astro’s subscription revenue declined by 4 per cent to RM1.04 billion in the quarter.

However, the pay-television residential average revenue per user (ARPU) rose slightly to RM100.70 from RM99.90 in the same quarter a year ago.

For its third-quarter, its net profit declined slightly by 3 per cent to RM146.6 million compared to the same period a year ago against revenue falling by 2 per cent to RM1.40 billion.

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