13 things you need to know about Astro Malaysia Holdings before you invest

In Malaysia, we have several free-to-air TV channels. They include TV1, TV2, TV3, NTV7 and 8TV. TV1, TV2 and TV3 are mainly targeted for Malay viewers as they air more Malay programmes. NTV7 has more English-language programmes and it closely resembles Channel 5 in Singapore. Meanwhile, 8TV is catered for the local Chinese audience as it has more Chinese programmes.

These channels all have one thing in common: Regrettably, they have gradually lost their appeal among urban viewers in Malaysia.

The reasons are obvious. Firstly, their content is outdated. For instance, these channels continue to air old Wong Fei Hung and Jackie Chan movies. Secondly, there are too many advertisements. Thirdly, the news presented from these channels are perceived by the public to be pro-government and propogandist. As such, there is a huge demand for alternative media providers in Malaysia. And fortunately, we have Astro!

In Malaysia, most households are willing to subscribe to Astro as it provides a wider selection of both local and foreign TV channels which are more entertaining, upbeat, and relevant to contemporary tastes and lifestyles. Gone are the days of “controlled media” and lacklustre TV programmes. Today, with Astro, we are now pampered with myriad choices of TV programmes to watch. Indeed, Astro has revolutionized daily entertainment in Malaysia.

In this article, I’ll write about Astro Malaysia Holdings Berhad (Bursa: 6399), one of Southeast Asia’s largest media conglomerate. Here are the 10 things you need to know:

1. Astro has achieved a CAGR of 10.80% in the number of TV households over the last five years. It increased from 3.07 million households in 2012 to 5.12 million households in 2017. In the process, Astro has captured a larger market share in Malaysia, up from 47% in 2012 to 71% in 2017. This growth was contributed by substantial increments in Astro NJOI customers — the first subscription-free satellite TV service in the country.

Source: Annual Reports of Astro Malaysia Holdings Bhd

2. Since its IPO, Astro has increased its number of radio stations from five in 2012 to 19 in 2017. During the period, Astro has grown its weekly radio listenership from 11.7 million listeners in 2012 to 15.6 million listerners in 2017. As a result, it has cemented Astro’s position as the leading radio operator in Malaysia. Moving forward, Astro will have two additional radio stations, Capital FM and Red FM, after the company completed its acquisition of Capital FM Sdn Bhd for RM40.38 million in December 2016.

3. Astro has achieved a CAGR of 8.87% in Advertising Expenditure (Adex) Revenue over the last five years. Adex revenue has grown from RM461 million in 2012 to RM 705 million in 2017. This was contributed by steady growth of both TV and radio Adex revenues during the period.

Source: Annual Reports of Astro Malaysia Holdings Bhd

4. Astro has steadily grown its Average Revenues per Unit (ARPU) from RM89.00 in 2012 to RM100.40 in 2017. In other words, customers have spent more money on Astro over the last five years. This is because Astro has upsold value-added products and services to its existing customers. These include Astro Beyond HD, Astro Beyond PVR, Astro Beyond IPTV, Astro On-the-Go, Superpack, Superpack Plus, and Valuepack.

Source: Annual Reports of Astro Malaysia Holdings Bhd

5. Since its IPO in 2013, Astro has achieved a CAGR of 7.11% in Group Revenues. It has increased from RM4.26 billion in 2013 to RM5.61 billion in 2017. This was contributed by rising Astro customers, higher Adex revenues, and continuous up-selling activities which were elaborated in the first four points mentioned above.

Source: Annual Reports of Astro Malaysia Holdings Bhd

6. Since its IPO in 2013, Astro has achieved a CAGR of 10.52% in Shareholders’ Earnings. It has grown from RM418.0 million in 2013 to RM623.7 million in 2017. In addition to sales growth, Astro has marginally improved its net profit margins from 9.8% in 2013 to 11.1% in 2017.

Source: Annual Reports of Astro Malaysia Holdings Bhd

7. Astro Malaysia Holdings has achieved a five-year ROE average of 86.41%. This means, the media conglomerate has made, on average, RM86.41 in annual earnings from every RM 100 in shareholders’ equity over the last five years. Impressively, Astro recorded 102.4% and 100% return on equity (ROE) in 2016 and 2017 respectively. This means, Astro has made more than RM100 in annual earnings from every RM100 in shareholders’ equity over the last two years. However, do note that the reason for Astro’s high ROE is due to its extremely high debt levels.

 20132014201520162017
Return on Equity81.7%73.1%74.9%102.4%100.0%

8. Over the last five years, Astro has generated RM5.57 billion in free cash flow. This has enabled Astro to pay off RM1.30 billion in net long-term debt. As a result, Astro has reduced its long-term borrowings from RM4.43 billion in 2013 to RM3.36 billion in 2017. Debt-to-Equity ratio has declined from 864.8% in 2013 to 538.3% in 2017.

 20132014201520162017
Free Cash Flow (RM millions)6271,0221,3251,2761,317
Debt/Equity Ratio864.75%773.1%549.1%666.8%538.3%

9. Also, the abundance in free cash flow has enabled Astro to pay RM2.61 billion in dividends to shareholders since its IPO in 2013. Astro has a five-year dividend payout ratio average of 98.27%. This means, it has paid out, on average, RM98.27 in dividends from every RM100 in earnings.

10. For the financial year ended 31 January 2017, Astro declared a total of RM0.125 in dividends per share (DPS). The dividends are paid on a quarterly basis. Astro paid RM0.03 in interim dividends for the first three quarters. For the final quarter, Astro paid out RM0.03 for the fourth interim dividend and declared an additional RM0.005 in final single-tier dividend. As at 5 June 2017, Astro is trading at RM2.55 a share. If Astro is able to maintain its DPS at RM0.125 a share, its expected dividend yield is 4.90%.

Source: Annual Reports of Astro Malaysia Holdings Bhd

Presently, Astro has firmly established itself as a leading media conglomerate in Malaysia with 188 TV channels and 19 radio stations. Moving forward, Astro is ready to scale its products and services regionally into the ASEAN market.

These initiatives include:

11. Go Shop
On November 1, 2014, Astro soft-launched Go Shop which operates Malay and Chinese home-shopping channels. Since its maiden launch, Astro has recorded 912 thousand customers and sold over 1.5 Million products.

In October 2016, Astro incorporated a 60%-owned subsidiary, Astro GS Shop Singapore Pte Ltd, to undertake a Mandarin-based home- shopping channel in Singapore. This is a partnership with StarHub and the shopping channel will be aired on StarHub Channel 110.

12. Tribe
Astro launched Tribe, its first mobile-first regional OTT streaming app, in Indonesia with XL Axiata in March 2016 and in the Philippines with Globe Telecom in December 2016.

Tribe provides live and on-demand content for Korean entertainment fans, sports fans, and Asian movie buffs. This includes Oh!K, KBS, K-Plus, TvN, and Fox Sports channels for a monthly subscription of IDR15,000 (approx.. RM4.86) in Indonesia and PHP69 (approx. RM6.00) in the Philippines. Since March 2016, Tribe has already recorded over 1 million downloads in Indonesia and the Philippines.

13. eGG Network
In April 2016, Astro launched eGG (Every Good Game) Network. It is the first e-sports HD channel in Southeast Asia. eGG broadcasts electronic game tournaments live around the world. These tournaments include Dota 2, FIFA Interactive World Cup, Counter-Strike and Street Fighter V.

In December 2016, Astro launched eGG Network in Australia via Fetch TV. It is also the first e-sports and gaming entertainment channel to be made available in Australia. As a result, eGG Network is now available in Malaysia, Indonesia and Australia. Astro plans to make eGG Network available in the Philippines.

Ian Tai is the founder of Bursa King, a data platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that helps investors unearth consistently profitable stocks from a database of over 900+ stocks listed in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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