Highlights

HLBank Research Highlights

Author: HLInvest   |   Latest post: Tue, 19 Jan 2021, 10:23 AM

 

Astro Holdings - Recovery Trajectory

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Astro registered 3QFY21 core PATAMI of RM149.1m (+27% QoQ, -6.3% YoY), which brought 9MFY21 core PATAMI of RM384m (-21%). This beats our forecast (82%) but in line with consensus (76%). Adex showed encouraging numbers with improvement +59% QoQ and +34% YoY on the back of resumption of local live show s that usually register a high adex deal. Despite the reintroduction of CMCO, we are comforted to know that the slide should be moderate and would unlikely to regress back to what was previously charted when MCO first introduced. We tweaked our FY21-23 forecasts by +17%/+15%/+11% to RM543.9m/RM512.6m/RM564.4m, respectively. Maintain BUY with higher DCFbased TP of RM1.10 (WACC: 7.5%, TG: -1%) from RM1.07. Additionally, Astro also pays out generous dividend, which translates to a yield of 8.9%.

Exceeds ours but in line with consensus. Astro chalked in 3QFY21 core PATAMI of RM149.1m (+27% QoQ, -6% YoY), bringing 9MFY21’s sum to RM384m (-21% YoY). This beats our forecast (82%) but in line with consensus (76%). The deviation came on the back of our conservative revenue projection. 9MFY21 one-off adjustment includes forex loss of RM11m and loss of disposal of unit trust RM1m.

Dividends. Declared third interim dividend of 1.5 sen/share (3QFY20: 2 sen/share) (ex-date: 17 Dec 2020). YTD DPS amounted to 4.0sen (9MFY20: 6.0sen).

QoQ. Revenue ticked up by +1.5% to RM1.11bn buoyed by the increased TV (2.9%) and radio (86%) business, but was toned down by the decrease in home shopping (- 24%). Home shopping declined as 2QFY21 was boosted by the festive seasons (Ramadhan and Hari Raya). EBITDA margin improved by 2.2ppt with the lower merchandise costs and copyright fees. Subsequently, core PATAMI jumped by 27% to RM149.1m

YoY & YTD. Revenue skidded by -9% YoY and -12% YTD on the back of the declines in TV (-10% YoY, -14% YTD) and radio (-30% YoY, -42% YTD) business, but partially cushioned by the rise in home shopping segment (+19% YoY, +31% YTD). The TV segment was lower largely due to lower subscription and advertising revenues. The increase in home shopping was on the back of shift in consumer spending habit. In tandem with that, core PATAMI declined (-6% YoY, -21% YTD) coupled with lower EBITDA margin by -2.3ppt.

Outlook. Home shopping segment that has been growing, took a breather chalking in lower sales QoQ with the absence of festive sales (Hari Raya). ARPU slowed down further, registering -0.4% decrease from RM99.9/month to RM97.6/month in 9MFY21 due to one-off rebate of RM40 for sports pack customers. Despite the lower ARPU, Astro have proactively mitigated the downgrading worries by accelerating more prepaid packs on the NJOI freemium offerings to capture more cost conscious subscribers. As results, NJOI revenue grew by 7% QoQ.

Adex on the other hand, showed encouraging number with improvement +59% QoQ and +34% YoY on the back of resumption of local li ve shows that usually register a high adex deal. Despite the reintroduction of CMCO, we are comforted to know that the slide should be moderate and would unlikely to regress back to what was previously charted when MCO first introduced in March. We opine with the nearing of year end, advertisers might choose to ramp up on their marketing in order to exhaust the budget allocated. Furthermore, with CNY slated in Feb 2021, we are optimistic that adex would register a good number in Jan 2021 which bolsters well for the group in 4QFY21.

ESG. Astro have been strong in their ESG (the “S” in particular) initiatives with complimentary viewing of selected content during MCO/CMCO for Astro & NJOI customers, and all Malaysians through Astro GO. Additionally, with cinemas closed, Astro First worked with local film producers to premiere local films directly to homes. Mael Totey Astro First top move that was premiered on 22 Oct registered revenue of RM7m to date.

Forecast. Given the performance beat, we tweaked our FY21-23 forecasts by +17%/+15%/+11% to RM543.9m/RM512.6m/RM564.4m, respectively.

Reiterate BUY with higher DCF-based TP of RM1.10 (WACC: 7.5%, TG: -1%) from RM1.07. After chalking in an improvement (from a flat previous two quarters), we are more sanguine on its outlook as it proactively pursues profitability through various platforms and adhere to cost discipline. Additionally, the recovery in adex also bodes well with the group top line. Coupled with an attractive dividend yield of 8.9%, we opine that the near term risk to reward equation is still tilted to the upside.

Source: Hong Leong Investment Bank Research - 4 Dec 2020

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