KUALA LUMPUR (June 26): Shares in Astro Malaysia Holdings Bhd (KL:ASTRO) fell to their lowest in five weeks, as analysts flagged tougher days ahead, after the pay-television operator reported weaker-than-expected first-quarter results.

Astro fell as much as 10% or 3.5 sen to 30.5 sen, its lowest since May 20, on Wednesday morning. The stock closed at 32 sen, valuing the company at RM1.67 billion on Bursa Malaysia. Trading volume totalled 42.7 million shares.

The results for the first quarter ended April 30, 2024 (1QFY2025) accounted for only about 13% of the consensus full-year forecast, even after adjusting for extraordinary items including foreign exchange losses. Analysts, meanwhile, are warning of further pressure on revenue and Astro's share price.

“We are wary of sustained top-line pressure” from both the subscriber rout and average revenue per user squeeze, said Kenanga Investment Bank. “Moreover, we believe that fixed costs remain high at this juncture, as according to Astro, both of its cost bases, legacy and new, are running concurrently.”

Kenanga cut its target price to 25 sen, the lowest among 12 research houses covering the stock, and maintained its ‘underperform’ recommendation, equivalent to a ‘sell’ call.

Shares in Astro have declined 22% so far this year, as the company grappled with intense competition from so-called over-the-top media services, such as Netflix, which eroded its subscriber base. Further, subdued consumer and business sentiment have also dragged on advertising expenditure growth.

Analysts are largely bearish on Astro, with a majority of seven ‘sell’ calls, four ‘hold’, and only one ‘buy’ rating. The consensus 12-month target price is now 31 sen, according to Bloomberg.

While Astro subscribers have risen 20% in the last two months and new Chinese subscribers have returned after a four-year hiatus, “we are wary that consumer sentiment may weaken further as the government rationalises more subsidies”, said Maybank Investment Bank.

That could cut into Astro’s subscriber revenue again, the investment bank said, downgrading the stock to ‘sell’ from ‘hold’ on Wednesday, the latest research house to cut its rating.

The consensus forecast for net income stood at RM165 million for FY2025, following the latest revisions.

On Tuesday, Astro reported a 7% increase in net profit to RM17.01 million for 1QFY2025, from RM15.9 million for the same period last year, due to lower net financing costs. Earnings per share improved to 0.33 sen, compared with 0.30 sen previously.

However, the company's revenue saw a decline of 9.85% to RM772.53 million from RM856.94 million, attributed to lower subscription and advertising revenue.

On its part, Astro highlighted challenges moving forward, such as the impact of a strong US dollar on various operational costs, local economic conditions strained by geopolitical factors, as well as subdued consumer sentiment, which will continue to affect the industry.