Astro’s FY22 core net profit of RM484.3m came in within our (95.9%) and consensus (101.0%) expectations. With Malaysia reopening its borders on 1st

April 2022, we expect the improvement in business conditions and consumer activity to contribute positively to recovering adex and commercial subscriptions. Additionally, with the recent launch of their broadband fibre service as well as the introduction of more value bundles, we believe this will contribute positively to Astro’s earnings in subsequent quarters. Maintain BUY with an unchanged DCF-based TP of RM1.40 (WACC: 7.7%, TG: 0%). Additionally, Astro currently provides an attractive dividend yield at 6.8%.

Finishing in line. Astro’s 4QFY22 core earnings of RM129.7m (+38.7% QoQ, -14.4% YoY) brought FY22 core earnings to RM484.3m (-9.6% YoY). This is deemed within our (95.9%) and consensus (101.0%) expectations. FY22 one-off adjustment includes forex loss (+RM23.5m) and unit trust disposal gain (-RM0.1m).

Dividends. Declared fourth interim dividend of 1.5 sen/share (4QFY21: 1.5 sen/share) (ex-date: 14 Apr 2022) and proposed final dividend of 0.75 sen/share pending AGM approval. FY22 DPS amounted to 6.75 sen (FY21: 8 sen).

QoQ. Revenue was flattish (+0.8%) contributed by TV (+1.3%) and radio (+73.8%) while offset by the decrease in home shopping (-28.7%). Under TV segment, TV adex increased +56%. This was the best adex quarter since the beginning of the pandemic as business activities improved, while vernacular content that anchors TV adex were aired following the resumption of TV production. The increase in radio is mainly contributed by higher adex as interstate travel resumed following the reopening of state borders as well as the earlier CNY festival. Core PATAMI however increased significantly (+38.7%) due to lower content costs following the end of major sporting events.

YoY & YTD. Revenue declined by -7.0% YoY and -4.2% YTD on the back of the declines in TV (-4.7% YoY, -2.9% YTD) and home shopping (-39.5% YoY, -17.3% YTD) businesses, but partially cushioned by the rise in radio segment (+22.6% YoY, +2.5% YTD). The TV segment was lower largely due to lower subscription revenue partially offset by an increase in sales of programming rights and adex revenue while the decrease in home shopping was due to (i) a shift in consumer shopping habits as offline shopping increased resulting from lockdown fatigue; and (ii) subdued consumer sentiment and more cautionary spending in view of increasing inflation. The increase in radio segment is largely due to the same reasons mentioned in the QoQ paragraph above. Core PATAMI declined by -14.4% YoY due to higher administrative expenses and finance costs. Core PATAMI declined -9.6% YTD in tandem with the decline in revenue.

Outlook. We are encouraged that adex saw a huge recovery this quarter and we expect adex revenue to continue on this positive trajectory in the coming quarters as Malaysia enters the endemic phase. Moreover, with addressable advertising expected to roll out on linear TV across all Astro homes and live channels on Astro Go in FY23, we expect adex to contribute more to Astro’s total revenue in subsequent quarters as more targeted advertisements can be aired during the same air time slot. As Malaysia reopens its borders on 1st April 2022 we also expect the improvement in business conditions and consumer activities (F&B and hotels) to boost commercial subscriptions which provide a better margin. With more streaming service partnerships in the pipeline as well as the recent launch of Astro’s own broadband fibre service, we expect Astro’s efforts in creating these bundle packages to not only attract potential customers but also retain their current customer base through cost savings.

Forecast. Unchanged.

Maintain BUY with an unchanged DCF-based TP of RM1.40 (WACC: 7.7%, TG: 0%). We continue to like Astro for its efforts in (i) aggregating streaming services to capitalize on the shift in TV viewing preference from linear to on -demand; (ii) introducing and deploying internet-connected plug-and-play set top boxes which reduces installation costs for Astro, while allowing for on-demand viewing and avoiding rain fade issues for customers; and (iii) aggregating TV bundles with broadband services which provides convenience (payment under one bill) and cost savings (vs subscribing to TV and broadband services separately) to consumers. Additionally, Astro currently provides an attractive dividend yield at 6.8%.

Source: Hong Leong Investment Bank Research - 1 Apr 2022