CEO Morning Brief

Astro Falls to All-time Low of 40 Sen as Uncertainty Clouds Dividend Outlook

Publish date: Thu, 05 Oct 2023, 08:49 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Oct 4): Astro Malaysia Holdings Bhd’s share price continued heading south on Wednesday. It hit an all-time low of 40 sen a week after the release of its quarterly earnings which came below consensus estimates.

The stock has plunged 61.17% from last year’s peak of RM1.03 in end-March. In other words, a cumulative RM3.29 billion has evaporated from the pay-TV group's market capitalisation over the past 18 months.

Investment analysts broadly hold rather bearish valuations of Astro with the lowest target prices at 35 sen pegged by KAF Equities Sdn Bhd and 38 sen by AmInvestment Bank. The median target price stood at 47 sen.

Overall, six out of the 12 analysts tracking Astro have a “sell” recommendation on the stock, while the rest are recommending clients to “hold” onto the shares.

However, Astro’s historical dividend yield has soared to 7.5% following the sharp fall in share price.

Nonetheless, a high dividend yield may not be enough to outweigh concerns revolving the pay-TV group’s dwindling subscriber base as well as its recent move to revise its dividend policy.

In conjunction with its quarterly earnings released last week, the group also announced its move to revise its dividend policy from a dividend payout ratio (DPR) of 75% of profit after tax, amortisation, and minority interest (Patami) to determining DPR based on consolidated Patami on an annual basis.

Taking cues from the dividend policy shift as well as its recent earnings miss, analysts have forecasted Astro’s dividend per share (DPS) for the financial year ending Jan 31, 2024 (FY2024) to range between 1.8 sen and three sen. At the stock’s intraday low of 40 sen, this translates to a dividend yield of 4.5% and 7.5%.

“As Astro has been viewed as more of a dividend than growth stock, we believe that the DPS uncertainty will be viewed poorly,” Maybank Investment said.

Back in FY2022, Astro’s DPS stood at 6.8 sen, which translated to a dividend yield of 7% while in FY2023, its DPS stood at three sen, which translated to a dividend yield of 4.9%.

Meanwhile, Astro’s 2QFY2024 earnings fell short of consensus estimates last week, which analysts largely attributed to weaker-than-expected subscription revenue and higher-than-expected operating costs.

Maybank Investment underlined that Astro’s moves to revise its dividend policy as well as undertake another voluntary separation scheme point towards the group’s uncertain outlook, driven by poor consumer sentiment and persistent content piracy.

Kenanga Research cautioned that the group may continue to see high content costs in the event the weak ringgit persists, as it will lead to higher costs for imported programmes.

Earlier this week, the group announced the shutdown of its home shopping business Go Shop effective Oct 11, citing a “challenging overall economic landscape and the changes in consumer shopping behaviour”

It is worth noting that Astro’s substantial shareholders are billionaire Ananda Krishnan Tatparanandam, with a 41.29% stake, and Khazanah Nasional Bhd, with a 20.67% stake. Ananda also controls a 62.26% stake in Maxis Bhd.

The Employees Provident Fund ceased to be a substantial shareholder of Astro back in January this year.

Shares in Astro pared losses to close at 41.5 sen, still down 2.5 sen or 5.68%. The group is valued at RM2.16 billion.

Read also:
Home shopping Astro Go Shop to cease operations after eight years
Astro hits all-time low as 2Q result misses expectations
Higher costs, forex loss drag Astro’s 2Q

Source: TheEdge - 5 Oct 2023

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