Business

Saturday August 1, 2009

Higher subscription fees to ease pressure on Astro

By LEE KIAN SEONG


PETALING JAYA: Astro All Asia Networks plc’s plan to raise its subscription price is expected to mitigate the pressure from the escalating content cost and on earnings going forward.

According to OSK Research, Astro will be raising the subscription fee for its popular sports package by RM12 per month effective today.

The research house said in a report the price hike would help offset the sharp increase in sports content cost and mitigate the anticipated pressure on earnings arising from the introduction of new channels.

Content cost as a percentage of revenue surged to 37% in the first quarter ended April 30 from 35% in the preceding quarter.

“The upcoming tender for the new Barclays Premier League season is also pressuring the company’s earnings as the asking price is likely to be at least 20% higher than the previous season,” it said.

The brokerage said based on the guidance that 70% of Astro’s subscribers were on the sports package, the price hike would translate into an effective increase of RM8.40 per month per subscriber.

“We estimate this would bump up Astro’s financial year ending Jan 31 (FY10) earnings by 8.3%, based on a six-month impact for FY10 and 16.2% for FY11,” it said.

OSK did not rule out the possibility of further subscription fee rise in the near future, given the expected launch of high definition (HD) content by year-end.

The increase on vernacular as well as fresh offerings with the added transponder capacity from the new Measat-3A satellite were other factors favouring the future price hike.

It last raised its subscription rates in mid-2007 by RM5 to RM15. Before that, rates rose by RM5 across the board in 2004.

OSK upgraded Astro’s average revenue per user assumptions for FY10 and FY11 to RM83 and RM90 from RM81 and RM83 respectively previously.

“We raised our capital expenditure forecast for FY10 and FY11 to RM300mil from RM200mil to reflect the progressive upgrade on Astro’s broadcasting infrastructure to be HD-enabled and ancillary upgrade for its customer relationship management equipment,” the report said.

OSK maintained its conservative subscriber growth assumptions for FY10/11 of 240,000 net additions.

The research house maintained its “trading buy” premised on a potential value accretive restructuring exercise in the offing and its steady Malaysian operations, and revised its target price to RM3.92.


ASTRO : [Stock Watch] [News]

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