19 October 2012

New IPO: Astro Malaysia Holdings

The Return of a Pay TV Giant!!! Astro Malaysia Holdings (AMH) is poised to list on Bursa's Main Market on 19th Oct with a market cap of RM15.6bil. The largest pay-TV operator in Malaysia has a de factor monopoly, commanding a 99% market share. Are you excited, again?



Background

AMH is the leading media entertainment group in Malaysia with 3,100,000 customers and one of the largest in South East Asia. It is primarily engaged in the creation, aggregation and distribution of content over multiple delivery platforms including TV, radio, publications and digital media within Malaysia.

What's the different from the then delisted entity?

Recall that Astro All Asia Networks (AAAN) was the one taken private in 2010 by its single largest shareholder Astro Holdisngs SB. Meanwhile, AMH is effectively the domestic media business arm of previously-listed AAAN.

How good was Astro Malaysia Holdings?
  • A monopoly in the pay TV segment with 99% market share
  • A capital intensive industry, creates a high barrier for new entrants
  • A buffet of content with presently 156 channels of which 68 are home grown channels. The increase in broadcasting capacity to 180SD and 102 HD channels with the launch of Measat-3B in 2014 will help boost ARPU and subscriber base.
  • Multi platform content distribution would enable the group to reach out to more customers

After the good things, let's have a look at some potential risk that AMH may face:
  • The group is subject to extensive regulation with its license subject to renewal;
  • The group’s exclusive satellite rights would end in 2017;
  • Its business is dependent on its infrastructure namely MEASAT-3 and MEASAT-3A and the launch of MEASAT-3B in 2014. Any failure to its existing satellites or delay in launching MEASAT 3B would interrupt its business operations;
  • Competition from incumbent IPTV player such as Hypp TV and the highly anticipated Asian Broadcasting Network could erode its market share. However we foresee this as a longer term threat.
  • Escalating rate of subscriber churn rate may decrease the group’s profitability given the presence of illegal set up boxes in the market such as skybox;
  • Unable to source or procure content at reasonable rates.
  • Its IPTV and OTT services may be affected by disruptions, delays and other difficulties from third-party network and broadband service providers just to list a few.
  • Exposure to foreign currency risk since the purchases of setup boxes, international content cost and transponders lease payments are mainly denominated in USD would impact its operations.


Then, how attractive is the pricing? Is it expensive? Based on different valuation method, below is the fair value given by various research houses:


Source: Various including research report from TA and OSK.

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