Maintain BUY call and MYR1.36 DCF-based TP
The Copyright (Amendment) Act 2022 implies to us that it is potentially
very potent in combatting content piracy which has plagued ASTRO over
the last 6 years. We maintain our earnings estimates and MYR1.36 TP for
now as this act is literally fresh off the printing press and has yet to be
tested in court. We have also introduced an expanded ESG tear sheet for
ASTRO and assigned it an above average overall score of 66, based on its
aggregated quantitative/qualitative/target-based metrics.
Turning the screws on content pirates
Copyright (Amendment) Act 2022 now explicitly recognizes streaming
technology as an avenue to infringe copyright. A reading of Section 43AA
implies that e-commerce (e.g. Shopee, Lazada, Carousell) and social
media platforms (i.e. Facebook) that openly sell illegal streaming
devices, colloquially known as TV boxes, are likely guilty of infringing
copyright. A Feb 2019 YouGov poll found that 87% of Malaysian TV box
owners purchased them from e-commerce and social media platforms.
ASTRO can take action against TV box vendors
Positively, Section 51B implies that ASTRO, as a copyright owner, can
‘test’ purchase TV boxes to determine if anyone is infringing its copyright
and take legal action against suspected offenders. Negatively, Section
41A (2) implies that offenders may avoid prosecution if made a written
offer to ‘settle’ by the relevant authorities. The related safeguard is that
the written consent of the Public Prosecutor, also known as the Attorney
General, must be sought before issuing the aforesaid written offer.
Earnings estimates and TP unchanged for now
Given that the act is new and yet to be tested in court, we maintain our
earnings estimates and TP which are premised (also unchanged) on
ASTRO’s TV subscription revenue inching up 1-2% p.a. after falling 30%
over the last 6 years (Fig. 1). We also note that churn may remain high
not only due to content piracy but currently fragile consumer sentiment
due to purchasing power being eroded by rising inflation. Yet, this act
could be a very positive inflection point for ASTRO