Investment Highlights

• We maintain BUY on Astro Malaysia Holdings (Astro) with an unchanged DCF-derived fair value (FV) of RM1.33/share. The FV reflects a 3% premium to its 4-star ESG rating as appraised by us, and it implies an FY23F PE of 11.4x.

• We fine-tune FY23F–FY24F earnings as Astro’s FY22 core net profit of RM475mil (excluding exceptional items) is within expectations, making up 96% of our forecast and 99% of consensus estimate. Meanwhile, Astro declared a fourth interim dividend of 1.5 sen/share and proposed a final dividend of 0.75 sen/share in 4QFY22, bringing the total DPS to 6.75 sen for FY22 and an attractive dividend yield of 6%. The payout ratio of 74% is in line with its dividend payout policy of 75%.

• YoY, Astro’s FY22 core net profit fell 11% on weaker television (TV) and home shopping earnings. Here are YoY highlights:
  • TV PBT slid 15% due to lower revenue arising from lockdowns until October 2021 which led to decreased subscriptions, offset by increased advertising revenue and sale of programming rights. The segment was also affected by higher broadband, content and marketing/distribution expenses.
  • Radio PBT grew by 41% due to improved revenue on the back of the reopening of economic activities and festive seasons, resulting in higher advertising spending.
  • Home shopping reversed to a slight loss of RM0.4mil from a PBT of RM16.6mil in tandem with a 17% decline in revenue as consumers returned to physical stores following the easing of movement restrictions.
     
• QoQ, Astro’s 4QFY22 PBT climbed 13% to RM152mil on the back of higher advertising spending due to festive seasons in 4QFY22 coupled with the gradual easing of movement restriction since October 2021. However, Astro’s bottom line was still burdened with lower subscription revenue and merchandise sales as consumers returned to physical stores.

• We are cautiously optimistic on Astro’s earnings momentum as the home shopping segment, currently loss-making, could continue to drag the overall performance. Nevertheless, we expect an FY23F recovery from improvements in industry-wide adex and consumer sentiment.

• We believe that the Russia-Ukraine war have no direct impact on Astro. However, an escalation of the war may lead to a heightened risk of inflation and recession, which may dampen consumer sentiment, causing advertisers to reduce their advertising budget.

Source: AmInvest Research - 1 Apr 2022