MIDF Research remains positive on the outlook for Astro Malaysia Holdings Bhd (Astro) as the company continues to show meaningful progress on its cost optimisation plan while pursuing profitability through its multitude of platforms.
The research house has maintained its buy call on Astro with a revised target price of RM1.04 from RM1.84 previously, it said in a note today.
"We believe the earnings momentum of the group to be primarily driven by its improving cost structure going forward.
"Meanwhile, the pay-TV average revenue per user has also managed to stay around RM100 which we postulate to be mainly through the higher consumption from its On Demand VOD, OTT platforms (i.e. Astro Go) and NJOI," it said.
Moreover, MIDF Research opines that the Movement Control Order (MCO) period would possibly help to further drive content consumption and online purchases from Astro’s platforms.
"The expected encouraging sign-ups from non-Astro customers for Astro Go during the MCO period which might possibly be converted into paying customers could bode well for the well-being of the group as well.
"We also postulate there will be pent-up demand for its set-top boxes as well as its Ultra Box in 2QCY20 post-MCO given the healthy orders traction since its launch," it said.
In terms of valuation, the stock appears to be attractive as it is currently trading at a 1.5 times SD-discount to its two-year historical average price-to-earning ratio of 11.7 times.
"We expect this would increase monetisation opportunities for Astro’s pay-tv segment.
"Coupled with the appealing dividend yield of 10.8%, we are maintaining our buy recommendation on Astro," it said.
As at 10am, Astro rose three sen or 3.61 per cent to 86 sen with 417,000 shares changing hands. - March 26, 2020, Bernama