Results

• Slightly Above Expectation. Reported FY17 core earnings of RM673.3m (adjusted for unrealised forex loss of RM57.9m and derivative gain of RM8.3m) was slightly above expectations, accounting for 107% of HLIB?s full year estimates but within expectation of consensus accounting for 102% of the full year estimates.

Dividends

• Declared fourth interim single-tier dividend of 3.0 sen/share and final single-tier dividend of 0.5 sen/share,bringing full year dividend to 12.5 sen/share (FY16: 12.0sen/share).

Highlights

• QoQ: 4QFY17 revenue was affected by decrease in adex, year-end festive celebration, pending deliveries due to flooding and resource issues faced by logistic partners, causing revenue to drop by 1.9%. As a consequence, EBITDA and PBT fell 5% and 10%, respectively.
• YoY: Revenue declined marginally by 0.3% as it experienced a decline in pay-TV subscriptions and home shopping but offset by radio segment thanks to strong listenership. EBITDA declined by 12% as Astro had to face higher content cost stemming from the double sporting year (EURO2016 and Olympic 2016), higher cost of merchandise sale, broadband expenses and impairment of receivables.
• FY17: EBITDA declined 6% as Astro or the reasons stated above but were slightly offset by higher revenue of 3%. PBT increased 2% mainly due to lower net interest expense.
• Number of subscribers and churn rate: The group?s reach increased by 6% yoy to 5.1m subscribers due to a 30% yoy increase in NJOI subscribers but offset by a 2% decline in Pay-TV subscribers. Its churn rate also increased by 2ppts due to higher ARPU of RM100.40 (RM99.90 in 3QFY17).
• Outlook: Astro continues to grow despite unfavourable consumer and business sentiment and dreary adex condition. The group has managed to increase ARPU from RM99.90 to RM100.40 as some subscribers trade up in their subscription packages. Astro continues to gain more eyeballs and subsequently adex which demonstrates their capability to develop alongside the structural shift in media landscape.

Risks

• (1) Unexpected economic slowdown; (2) Threat of new players; (3) High content costs; (4) Regulatory risks; (5) Shift to digital alternatives; and (6) DTTB as substitution for consumers and advertisers.

Forecasts

• Unchanged.

Rating

BUY (↔)

• We like Astro due to its monopoly in the pay-TV segment, increasing penetration in the local households, innovative home shopping business, its move towards gaining regional eyeballs and ability to attract adex despite the overall soft consumer and business sentiment.

Valuation

• We maintain our BUY call with unchanged TP of RM3.01 based on DCF valuation.

Source: Hong Leong Investment Bank Research - 29 Mar 2017