News Break...

Astro pays USD250m for EPL, earnings outlook at risk








According to various news reports, Astro will pay the bulk of the estimated USD250m for the Barclays EPL rights for the next three years. The cost of the EPL is said to be nearly double the previous price paid directly to EPSN. In our view, the steep jump in content price for EPL will lead to further price hike in the next 12 months and this is unlikely to go well with subcribers. Recall that Astro recently raised its Sports package price by RM12/user in Aug09. We estimate the higher EPL cost to translate into subscription price hike of RM7-8/user.







We are negative on the stock: (1) Headwinds from higher content cost, slower net additions and easing ARPU will have negative impact on earnings. 53k net subcribers in 2Q10 is the lowest in 2 years. (2) Our DCF derived price target of RM3.20/share implies 5% downside from current share price.







Newsbreak



Tenaga sued for RM107m



The power utility is being sued by Irham Niaga Sdn Bhd and Irham Niaga Logistics Sdn Bhd for wrongful repudiation of tenancy agreements. The 2 companies sue the power utility for a total of RM107m.



Dialog propose special share dividend



The group is proposing a special share dividend of 1 treasury share for every 50 shares held. According to the company, this special dividend is to commemorate the 25th anniversary of the incorporation of group’s companies.



MEMS classified as affected issuer



ACE Market-listed MEMS Tech has been classified as an affected issuer by Bursa after failure to submit a solvency declaration. The company may face suspension and possible delisting.



BAT: Increases in tobacco tax will increase illicit trade



The company views any future increases in tobacco excise tax as encouraging illicit cigarettes trading and will affect the earnings of legitimate industry players. The company hopes that the government will not increase the excise tax in the upcoming budget.









Economics



Malaysia: Foreign reserve was higher at $95.95bn as on 30 Sep compared to $93.54bn in mid Sep, on the back of appreciation of ringgit against the dollar in that period.



US: MBA mortgage applications last week increased 16.4%, reaching its highest level in four months as interest rates continued to fall toward near-record lows.



Euro: GDP fell 0.2% in 2Q compared to -2.5% in 1Q; the decline was sharper than the 0.1% fall estimated on 2 Sept, as consumer spending, investment and exports were weaker than earlier reported.