Results

• Above expectations. FY15 core earnings (adjusted for RM116.9m unrealised forex loss and RM69.2m derivative gain) increased by 12% to RM567.1m (10.91 sen/share), accounted for 107% and 104% of both ours and consensus’ full year estimates.

Deviations

• Due to lower than expected expenses.

Dividends

• Declared a net dividend of 2.25 sen/share and a final dividend of 2.0 sen/share (subject to shareholders’ approval during Astro’s AGM in June 2015). Hence, bringing full year dividends to 11.0 sen/share or 100% of our DPS estimates. Ex-date on 10 Apr-15, payment on 29 Apr-15.

Highlights

• FY15 results review… Astro achieved revenue of RM5.23bn (+9% Yoy), which achieved 95% of our full year earnings forecast. ARPU inched up by RM3 from RM96/month to RM99/month yoy, partly contributed by the increase in HD fee to RM25 from RM20 in December. FY16 would enjoy the full impact of HD price hike. Despite it being a FIFA World Cup year for Astro, the group managed to contain its costs, dropping marginally by 0.5% to RM1.01bn from RM1.02bn in FY14.

• EBTIDA grew 12% to RM1.81bn. After adjusting for EI, core earnings grew by 12% to RM567.1m from RM505.7m. FY15 was a peak year for depreciation as the STBs swap was recently completed. From FY16 onwards, we reiterate that the reduction in depreciation would be another driver to earnings growth.

• Net ads & Churn rate… Overall net ads increased 37%, with 547.3k new subscribers on board in FY15 (Pay-TV: 9.5k; NJOI: 477.8k). On a positive note, churn rate dropped by 0.4% to 9.9% qoq.

• Higher FCF position as we expect no major surges in capex in the near future. YTD, it has achieved RM1.33bn of FCF vs. RM1.05bn in the previous quarter (3QFY15).

• Astro Go Shop… Since its soft launch on 1 Nov-2014, Astro recorded RM25m revenue, with over 120k products sold. Astro Go Shop is expected to generate revenue of RM150m – RM170m in FY16. We believe this new ecommerce segment will be a boon for Astro’s earnings moving forward.

Risks

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

Forecasts

• Increased FY16 by 2% as we take into account the contribution from Astro Go Shop. Also introduced our FY17 earnings estimates.

Rating

BUY

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) Higher than expected content costs; (2) GST which reduces disposable income.

Valuation

• TP increased by 2.6% to RM3.56 based on DCF valuation with a WACC of 6.9% and TG of 1.0%.

Source: Hong Leong Investment Bank Research - 31 Mar 2015