Astro Malaysia Holdings - FY21 Within Expectation

Date: 26/03/2021

Source  :  KENANGA
Stock  :  ASTRO       Price Target  :  1.05      |      Price Call  :  BUY
        Last Price  :  1.13      |      Upside/Downside  :  -0.08 (7.08%)

FY21 normalised PATAMI of RM534m came within our/consensus expectations, making up 97%/104% respectively. Dividends came in 2.0 sen above expectations at 8.0 sen YTD. With the easing of movement restrictions and economic outlook looking positive in 2HCY21, we believe the group will face limited downside risk moving forward. Upgrade to OP with a higher TP of RM1.05. Enhanced dividend yield of 10% is viewed as attractive.

FY21 within expectations. FY21 recorded a normalised PATAMI of RM534m which came within our/consensus’ forecast, at 97%/104% respectively. Dividend came in 2.0 sen above expectations at 4.0 sen per share as interim dividend of 1.5 sen was declared with a proposed 2.5 sen dividend (YTD: 8.0 sen).

YoY, FY21 revenue dipped by 11% to RM4.36b from RM4.91b due to a 13% drop in television subscription, as indicated by a decline in ARPU to RM96.90/mth from RM100.00/mth in FY20, and total adex declining YoY (-27% in TV adex and -41% in radex). The revenue in FY21 was impacted by movement controls and softer economic environment which resulted in advertisers and consumers conserving cash. However, the decline in revenue was offset by a 26% rise in the Home Shopping segment as online shopping became a more convenient platform for consumers. All in all, ASTRO’s normalised PATAMI declined by 19% to RM534m.

QoQ, revenue remained stable at RM1.1b thanks to a 9% rise in TV adex revenue that offset the decline in both radex revenue (-8%) and TV subscription (-1%). The decline in radex was mostly likely due to the reimplementation of MCO in mid-January 2021. On the other hand, the Home Shopping segment declined by a mere 0.2% as high flooding in certain areas and high COVID cases impeded product delivery. That said, ASTRO registered a normalised PATAMI of RM155m (+2%).

Calmer tides. ASTRO’s Ultra Box is on a steady uptrend since its launch as QoQ installations rose by 44% to a total of 250k, indicating consumers’ positive response towards the product. With the recent launch of Ulti Box (provides HD resolutions vs Ultra Box which offers a 4K UHD experience) in February 2021, we believe the take-up rate for Ulti Box will be robust due to its cheaper installation charges compared to Ultra Box. Just like the Ultra Box, Ulti Box requires WiFi connection which will encourage consumers to opt for the Astro and broadband bundles, thus, increasing ASTRO’s customer base. Moreover, due to the long- awaited global sporting events (e.g. Tokyo Olympics and Euro 2020), we believe ASTRO may garner new subscribers while retaining their current viewers. That said, with movement controls easing and economic outlook looking positive in 2HCY21 due to the rollout of COVID-19 vaccines, we believe the group may recover the loss in TV customer base from FY22 onwards.

Post-results, we increase FY22E earnings by 24% and introduce our FY23E earnings where we anticipate normalised PATAMI to increase by 1.5%.

Upgrade to OUTPERFORM with a higher TP of RM1.05 (previously RM0.830) as we roll over our valuation base to FY23E PER based on an unchanged PER of 9.0x (1SD below the stock’s 3-year mean). We believe the stock will face limited downside risk moving forward as we see consumers responding well to the group’s strategies and foresee their upcoming strategies to be well received by consumers. Moreover, we like ASTRO for its high dividend yield (10%) and more resilient subscription-based model as opposed to other advertising-dependent players.

Risks to our call include: (i) lower-than-expected subscription, (ii) lower-than-expected adex revenue, and (iii) higher-than-expected content cost and operating expenses.

Source: Kenanga Research - 26 Mar 2021

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