Driven by higher adex, NJOI and Go Shop

Astro’s 9MFY17 core net profit of RM564.6m (+7.8% yoy) came in at 80% of our forecast. The improvement in earnings was driven by an increase in NJOI subscribers, adex revenue as well as Go Shop. Astro also announced a higher DPS of 9 sen in 9MFY17 as expected (9MFY16: 8.25 sen). Maintain our BUY rating on Astro with an unchanged TP of RM3.30.

9MFY17 results deemed within our expectation, higher DPS

Astro posted a higher 9MFY17 core net profit by 7.8% yoy to RM564.6m, on the back of higher revenue by 3.5% yoy to RM4.2bn. The increase in revenue was driven by better NJOI subscribers, adex revenue, home shopping business as well as radio division, but partially offset by the decrease in pay-TV subscribers. 9MFY17 core net profit was largely within our expectation but above consensus, accounting for 80% of our forecast. We deem this as in line with our expectation as we assume a more prudent 4QFY17 performance. Nonetheless, it was above consensus at 86.8% of FY17E forecast. Also, Astro announced an interim DPS of 3.0 sen, bringing 9MFY17 total DPS to 9.0 sen, higher than 9MFY16 total DPS of 8.25 sen.

3QFY17 core earnings up 16.4% qoq

Sequentially, Astro’s 3QFY17 net profit increased by 20.3% qoq to RM151m, despite revenue being flat at RM1.4bn (-0.3% qoq). EBITDA margin in 3QFY17 also improved by 3ppt qoq to 32.9%, mainly due to lower content costs particularly EURO 2016 in 2QFY16. Core net profit after excluding one-off items increased by 16.4% qoq to RM191.1m.

Maintain BUY with an unchanged target price of RM3.30

We leave our FY17-19 core EPS forecasts unchanged post the 9MFY17 results as a conservative measure. We maintain our BUY rating on Astro with an unchanged DCF-derived 12-month target price of RM3.30. We continue to like Astro as: 1) we expect a strong 2017-19 core EPS CAGR of 15.8%; and 2) we forecast a 4.9% FY17E dividend yield. The downside risks to our call include: 1) much lower-than-expected subscriptions, ARPU and adex growth; 2) an unexpected increase in competition from other pay TV operators; 3) a sharp drop in consumer sentiment, which could spur churn; and 4) a sharp drop in home-shopping contribution.

Source: Affin Hwang Research - 8 Dec 2016