Astro reported a 24.6% YoY decline in 4QFY22 net profit to RM126.6m, as its performance was affected by subdued consumer sentiment and higher offline shopping which resulted in a drop in television subscription revenue and merchandise sales. However, on a QoQ basis, headline net profit rose 19.5% due to higher adex, lower content cost and lower depreciation of right-of-use assets. For full-year FY22, core net profit of RM475m was within both our and market expectations. We lower our FY23-24F earnings forecasts by 4-6% as we raise our content cost assumption due to major sporting events and lower our TV subscription revenue forecast. Consequently, our TP is reduced to RM1.20. We downgrade Astro to Neutral. The Group declared a fourth interim dividend and a final dividend of 1.5sen and 0.75sen respectively, bringing its total dividend for FY22 to 6.75sen (FY21: 8.0sen).

• 4QFY22 revenue was down 7% YoY, due to a 7% and 39.5% decline in TV subscription revenue and home-shopping revenue respectively. Performance was largely impacted by subdued consumer sentiment and higher offline shopping resulting from lockdown fatigue. However, this was partly offset by higher advertising revenue, which gained 7.3% YoY due to the gradual easing of movement and interstate travel restrictions starting October 2021.

• 4QFY22 core net profit fell 15.4% YoY, as EBITDA margin decreased by 3.5 ppts to 29.6% due to higher license, copyright and royalty fees and staff related costs. This was partly mitigated by lower content cost, which dropped marginally to 31% in 4QFY22 from 32% in the previous year’s corresponding quarter. However, Astro delivered a stronger QoQ performance mainly due to higher adex, lower depreciation of right-of-use assets and lower content cost (31% versus 36% in 3QFY22).

• New product offering. Late last year, Astro announced a collaboration with Telekom Malaysia (TM) where the latter’s wholesale business arm, TM Wholesale, will provide Astro with a full suite of infrastructure and connectivity solutions that would enable Astro to offer high-quality broadband services to customers. This should lay the foundation for Astro to be an internet service provider (ISP) and create more content bundles to meet customers’ needs. Following this partnership, Astro has started offering Astro Fibre last week, its first-party broadband service while previous broadband packages were being delivered through its partnerships with Maxis and TNB’s Allo. Nevertheless, we do not expect any significant earnings accretion arising from this new product offering, given the competition from existing fixed broadband players.

Source: PublicInvest Research - 1 Apr 2022