After factoring in the offsetting effect of a potential rise in the churn rate, we raise our FY14-16 net profit forecasts by 2-3%. Our DCF-based target price increases accordingly. Astro remains an Outperform. The high definition set-top box swaps and Maxis's IPTV products will help lift revenue and act as stock catalysts. 

Effective 24 Nov 2013, Astro will raise the price of its family pack by RM2/month and the sport package by RM6/month. This is aimed at passing on the rise in content cost which has been escalating. With the increase, the family pack will cost RM39.95/month. This is the first price hike in two years. As a sweetener, all active subscribers to the sports pack before April next year will be entitled to watch all 64 FIFA World Cup (WC) 2014 matches live and in HD, with access to Astro On-The-Go (AOTG) on a complimentary basis. Our checks with the management reveal that the company is conservatively expecting a net positive impact of >RM2/month on its ARPU. 

We are not entirely surprised by the price increase as the company has been absorbing the increase in content cost. The price hike will be positive for Astro although it will be tempered by a higher churn rate due to the implementation of GST and gradual removal of subsidies. While churns increased right after all the previous price hikes, they normalised after 1-2 quarters. The annual number of subscribers also continued to rise. Furthermore, at RM2/month for non-sports package subscribers and RM8/month for the sports package, the price increase is small compared to previous price revisions. The freebie of live WC matches and in HD with access to AOTG should help Astro to retain customers. 

Accumulate. We expect Astro to continue registering consistent earnings growth given its status as the biggest pay-TV operator. Its subscription-free service NJOI and IPTV have seen encouraging growth and this will help to boost earnings.

Source: CIMB Daybreak - 04 November 2013, Full PDF Report