MultiChoice Group (MCG) is
a leading African digital satellite and pay-television company delivering
entertainment products and services to 15.1 million households across 50
countries across the African continent, according to its 2019 annual report .
MCG was spun out of South African media company Naspers (NPSNY)
on 27/02/19 when it began trading on the Johannesburg Stock Exchange.
MCG’s Lines of Business Include:
- Showmax – Internet-based subscription, video-on-demand service
- Irdeto – Cybersecurity and anti-piracy offering. Content
- MultiChoice Africa – Within the MultiChoice Africa
platforms, MCG offers the following:
SuperSport - One of Africa's leading sports broadcasters for pay-TV subscribers.
DStv – Sub-Saharan video entertainment company providing multiple entertainment channels and services via satellite, online, and mobile apps.
GOtv – Digital television platform carrying authentic programming made for the local African market.
M-Net - Multiple channels offering content to the African continent.
Growth in Fiscal 2020’s First Half
MCG grew its subscriber base by 7% to 18.9 million active households in
the first half of its 2020 fiscal year (period ending 9/30/19), according to
its earnings release. Its revenue increased 4% year-over-year (YOY) to
R25.7 billion, while core earnings increased 37% to R1.9 billion.
South Africa, which accounts for nearly 2/3 of MCG’s revenue, saw
subscriber and revenue growth of 7% and 2%, respectively. The rest of
Africa (RoA) saw subscriber and revenue growth of 7% and 5%, respectively.
Performance in RoA continues to improve due to a nearly R700 million
improvement in trading losses helped by cost savings, subscriber wins, and
better returns realized on growth opportunities.
During the first half of the fiscal year, the company increased local
content by 5% to over 54,000 hours.
Potential Future Growth
MCG currently boasts 8.2 million active subscribers in South Africa,
where it predicts there are 13 million addressable pay-TV households. In
the rest of Africa (ROA), MCG has 10.2 million active subscribers out of 27
million addressable pay-TV households. MCG has the potential to increase
its subscriber base substantially, according to its 2019 annual report.
Overall, pay-tv penetrations rates on the African continent are
substantially lower than in the developed world. For example, Angola at
31% has one of the higher penetration rates in Africa. This is compared
to the 71% and 58% penetration rates of the U.S. and Western Europe,
highlighting the potential opportunity for further growth on the continent.
MCG also continues to grow its local content. For 2020, MCG is
co-producing 52 new local movies and 29 new local drama. The company is
also selling its local content, such as The Bachelor South Africa,
Economic Outlook for Africa
In a previous article, we highlighted the case for investment in Africa (here). Key positives for Africa include a population of over 1.1 billion, which is
expected to rise to 1.7 billion by 2030, where 2/3 are below the age of 25, a
trend toward urbanization, and growth in consumer spending. These trends
should bode well for MCG as we believe that a large, working-age population may
demand and be able to pay for premium entertainment.
MCG is one of the leading entertainment content providers in
Africa. It strategy is to distinguish itself with content specific to the
African continent. MCG has experienced strong growth in subscribers and
revenue and is improving its operations in an effort to boost profitability.
Overall demographic trends in Africa may also provide a positive stimulus for
the company’s shares.
Article Date: 21st November 2019.