Astro Malaysia (Astro) reported a net loss of RM41m, after excluding contribution from Astro GS Shop, its home-shopping business which ceased to operate effective 11 October 2023. Stripping out unrealized forex loss and non-operating cost relating to its voluntary separation scheme (VSS), 3QFY24 core net profit stood at RM42m (-42.4% YoY). For 9MFY24, results were below our and market expectations, accounting for only 53% and 58% of full-year forecast respectively. This was mainly due to higher-than-expected operating cost, though revenue was broadly within our estimates. We cut our FY24-26F earnings forecasts by an average of 25% to factor in higher content cost and other operating cost. Consequently, our DCF-based TP is revised down to RM0.43. Although share price has fallen significantly and is trading at an undemanding valuation of c.10x forward PER, earnings visibility remains weak due to the challenging operating environment of the media industry. Hence, we maintain our Neutral rating on Astro.

• 3QFY24 revenue fell by 6.4% YoY, mainly due to a 6% decline in TV subscription revenue while advertising revenue was down 9%. Radio revenue was also weaker, fell by 13% YoY. This has resulted in an 8ppts drop in EBITDA margin to 22%.

• 3QFY24 headline net loss due to weaker revenue as well as higher staff cost in relation to VSS cost of RM40m and unrealized forex loss of RM92.5m. Home-shopping contribution has been excluded following the cessation of business operations with the disposal of Astro Go Shop in October 2023.

• Cash generation remains healthy, though borrowing has increased. YTD FY24, free cashflow remains healthy at RM503m compared to RM561m for YTD FY23. Although its net debt-to-EBITDA has risen from 2.5x in FY23 to 3.0x, it is still relatively low compared to the limit set in the debt covenant of 4.0x. As at 31 October 2023, about 60% of its total borrowing of RM3,255m was lease liabilities related to the leasing of satellite transponders.

Source: PublicInvest Research - 15 Dec 2023