- We maintain our HOLD call on Astro Malaysia (Astro) with an unchanged fair value of RM3.30/share.

- Astro declared a second interim dividend of 2.75sen, bringing 1HFY16 DPS to 5.5sen (1HFY15: 4.5sen).

- Astro’s 1HFY16 core net profit of RM320.9mil (+20.6% YoY) came in within estimates, led by higher EBITDA and lower depreciation of STBs, after stripping off an unrealised forex impact of RM15.3mil.

- Overall revenue increased by 4% YoY to RM2.7bil largely due to higher PayTV subscriptions, ARPU and adex. In tandem, EBITDA margins expanded by 4%, also due to lower content costs and lower marketing expenses.

- On a segmental basis, television came in strongly with an earnings contribution of RM349.7mil (+14.4% YoY).

- Radio earnings surprised with a growth of 20% YoY. During times of low consumer sentiment, radio adex is understood to thrive due to its low cost but “feel good factor”.

- Looking at Astro’s key operational indicators, churn stabilised at 9.8% and household penetration increased from 60% to 65% with 10k of Pay TV net adds. In addition, ARPU increased further by RM1 to RM99.

- We are particularly encouraged by the PayTV net adds and ARPU growth, as there were concerns of slowdown in the last quarter, due to the low consumer sentiment after the GST implementation.

- On adex, Astro grew by 5% YoY to RM305mil. This is despite a lower consumer sentiment. Astro’s 360 degrees advertising offering seems to resonate well with advertisers.

- Looking forward, Astro will continue to focus on its topline while actively managing its costs. It is still committed to achieving 50,000 new PayTV subscribers and ARPU of at least RM100 by end-FY16F through new value propositions.

- Astro launched seven additional channels this quarter, consisting of HD, Chinese, and ala-carte sports channels. It also improved its AOTG services interface as well as the capability to view content offline.

- Astro is well hedged in the short to medium term against the higher USD/MYR foreign exchange rate. Its content costs are hedged against the USD up to early- FY17F.

- While majority of its USD debt are hedged, it experienced higher net finance costs of RM46.8mil in the first half due to discounting of its four new transponders’ deposit to a present value of RM22mil.

- Astro currently trades at 24x FY16F PE – slightly below its 3- year average of 26x.

Source: AmeSecurities Research - 18 Sep 2015