Playing catch-up. After our successful trading call on Media Prima (report) on 15 Feb, the stock price had surged 41% to end at RM0.63 last Friday. On the contrary, ASTRO, which is one of the prime beneficiaries of adex recovery has been lagging behind, rising only 9.47% YTD. We reckon ASTRO will play catch-up underpinned by (i) strong recovery in CY22 adex amid GE15 expectations; (ii) the recovery in commercial subscription that provides better margin on the back of picking up in consumer activities and inter-state travelling; and (iii) undemanding valuation coupled with an attractive dividend yield.

Overall, HLIB reiterates an OVERWEIGHT call in the Media sector with top picks being MEDIA and ASTRO. We note that advertisers are increasingly adopting an omni channel advertising approach (a method where advertisers do not just advertise through online platforms, but also through traditional media platforms to widen their audience reach) which will benefit the local media players. Also, the broadcasting media players are deemed to be a recovery proxy with inflation-resistant cost base as their content cost are largely unaffected by inflationary pressures. Hence, with recovery prospects turning brighter, coupled with potential re-rating catalyst such as the potential GE15 in 2022, media players are deemed to be a beneficiary yet stock performance of ASTRO remains a laggard.

Still trading at an undemanding valuation. ASTRO is trading at an undemanding 10.8x FY22 P/E (21% and 22% discount against 5-year average and peers average of 13.1 x and 13.8x, respectively), supported by an attractive 7.2% dividend yield. While the recent EPF withdrawal programme approved by the government could attract potential selling pressure, this would provide a good opportunity for investors to accumulate an overlooked recovery proxies. In fact, the withdrawal programme could provide an impetus to boost consumer spending, which will bolster for stronger adex as advertisers compete to get a slice of pie from the spending boost.

Rounding bottom. Technically, ASTRO is pending for a rounding bottom formation rebound. A strong breakout above its neckline RM1.05 will spur the price toward RM1.12-1.17-1.20 levels. Cut loss at RM0.97.

Source: Hong Leong Investment Bank Research - 21 Mar 2022