Results

9MFY14 core PATAMI (adjusted for RM10.0m and RM30.0m unrealised forex and derivative losses respectively) was flat at RM376.6m (7.24 sen/share), making up 77% of our forecast, but beat consensus’ estimates by making up 83% of full year forecast.

Deviations

Largely in line.

Dividends

Net dividend of 2 sen/share declared. Same payout over the last 2 quarters, hence bringing YTD dividends declared to 6 sen/share. Ex-date on 18 Dec-13, payment on 10 Jan-14.

Highlights

Results review… 3QFY14 revenue grew by 13%/2% YoY/QoQ to RM1.22bn, driven by higher NJOI sales, which added 67.8k subscribers during 3Q. With stable EBITDA of 34.3%, EBITDA grew by 22%/3% YoY/QoQ to RM417.4m. After EI adjustment, core PATAMI grew by 38% YoY, but dipped slightly by 1% QoQ to RM133.5m.

9MFY14 revenue grew by 13% to RM3.53bn, lifted by strong growth in all key divisions. Added 299.1k new subscribers during the period (Pay-TV: 126.4k; NJOI: 172.7k) with ARPU growing by 4% to RM95.6/month. Although EBITDA grew by 15% to RM1.20bn, core PATAMI was flat at RM376.6m due to accelerated depreciation and higher amortisation charges.

B.yond tail end… Achieved to swap out 2.72k of old set-top boxes (STB) with B.yond STBs (80% swap rate). Going forward, this rate will slowdown and we should see expenses for this swap out exercise peak, potentially leading to stronger earnings growth.

More HD… With the satellite launched, more High Definition (HD) channels are expected to be offered. HD subscribers have reached 1.61m, representing 60% of Pay-TV subscribers. We are optimistic on this trend as this segment generates higher ARPU for Astro.

Higher content… Next year should see higher content cost given the additional key sporting event of World Cup 2014. However, this impact will be mitigated by the continuing trend of revenue growth and rate revision which will see RM2 price increase for Family Pack and RM6 increase for Sports Package.

Risks

Unexpected economic slowdown; Threat of new players; High content costs; and Regulatory risks.

Forecasts

Unchanged.

Rating

HOLD

Positives: (1) Monopoly of pay-TV; (2) Higher subscriber base through stronger penetration rate and ARPU growth through new product offerings; (3) Strong take-up in IPTV.

Negatives: (1) Blocked from raising subscription rates; (2) Subsidy cuts which reduces disposable income.

Valuation

TP raised by 1.3% to RM3.01 due to lower tax rate of 24% from FY17 onwards, based on DCF with an unchanged WACC of 7.3% and terminal growth of 1.5%.

Source: Hong Leong Investment Bank Research - 6 Dec 2013