Astro’s FY21 core net profit of RM535.5m came in within our (101.6%) and consensus (96.0%) expectations. Despite the reintroduction of MCO, adex remained resilient (+2.4% QoQ) as MCO 2.0 was less restrictive supported by year end and CNY spending. We keep our forecasts unchanged. Maintain BUY with an unchanged DCF-based TP of RM1.10 (WACC: 7.5%, TG: -1%). Additionally, Astro also pays out generous dividend, which translates into a yield of 8.2%.

Finishing in line. Astro’s 4QFY21 core earnings of RM151.5m (+1.6% QoQ, +20.3% YoY) brought FY21 core earnings to RM535.5m (-12.1% YoY). This is deemed within our (101.6%) and consensus (96.0%) expectations. FY21 one-off adjustment includes forex gain of RM5.3m and unit trust disposal loss of RM0.9m.

Dividends. Declared fourth interim dividend of 1.5 sen/share (4QFY20: 1.5 sen/share) (ex-date: 8 Apr 2021) and proposed final dividend of 2.5 sen/share pending AGM approval. FY21 DPS amounted to 8 sen (FY20: 7.5 sen).

QoQ. Revenue was flattish (+0.2%) contributed by TV (+0.6%) while offset by the decrease in radio (-8.2%) and home shopping (-0.2%). Core PATAMI remained rather flattish (+1.6%) in tandem with topline trend.

YoY & YTD. Revenue skidded by -9.5% YoY and -11.2% YTD on the back of the declines in TV (-9.1% YoY, -12.5% YTD) and radio (-40.1% YoY, -41.4% YTD) businesses, but partially cushioned by the rise in home shopping segment (+10.1% YoY, +25.5% YTD). The TV segment was lower largely due to lower subscription revenue, while the decrease in radio was due to lower adex from lower road traffic due to lockdown restrictions. The increase in home shopping was on the back of shift in consumer spending habits amid Covid-19. Core PATAMI increased 20.3% YoY due to lower marketing and distribution costs, finance costs and tax expenses. Core PATAMI declined -12.1% YTD in tandem with the contraction in revenue.

Adex. Despite the reintroduction of MCO, adex remained resilient (+2.4% QoQ) as MCO2.0 was less restrictive. The sustained adex QoQ was also supported by advertisers exhausting their marketing budget at year end as well as the festive season adex spending for CNY 2021.

Outlook. We are encouraged that adex remains resilient despite MCO2.0 and expect it to increase in subsequent quarters due to improving consumer sentiment arising from the easing of lockdown restrictions and vaccine rollout. The momentum in the growth of the home shopping segment seems to be slowing down (flat QoQ) as discretionary spending is sensitive to household income, which was affected by the pandemic. With improving consumer sentiment and business reopening, we may see the growth momentum in this segment picking up again in subsequent quarters. We are also encouraged by management’s guidance that more streaming services partnership are in the pipeline TBA later, which would be positive for ARPU as well as retaining the current customer base as content consumption habits are now shifting towards on demand streaming.

Forecast. Unchanged.

Reiterate BUY with an unchanged DCF-based TP of RM1.10 (WACC: 7.5%, TG: -1%). With the easing of restrictions and improving consumer sentiment, this will bode well for both the group adex as well as the home shopping segment going forward. Coupled with an attractive dividend yield of 8.2%, we opine that the near term risk to reward equation is still tilted to the upside.

Source: Hong Leong Investment Bank Research - 26 Mar 2021