Largely Within Our Expectation

Astro’s 1QFY18 core net profit of RM200m (-4.4% yoy) came in at 26% of our forecast. The decline in earnings was due to lower contribution across TV, radio and home shopping divisions. Astro also announced a DPS of 3 sen in 1QFY18 (1QFY17: 3 sen). Maintain our BUY rating on Astro with an unchanged TP of RM3.16. We continue to like Astro as we expect earnings will continue to grow going forward giving attractive 4.9% FY18E dividend yield.

Slightly Lower Revenue Across All Divisions

Astro’s 1QFY18 revenue declined slightly by 2.7% yoy (and -5.1% qoq) to RM1.33bn, due to lower contribution across all divisions. Astro’s revenue contribution from TV (due to decrease in licensing, subscription and advertising revenue), radio (lower advertisement spending during 2017 Chinese New Year) and home shopping (due to additional tactical campaigns) declined by 2.8%, 0.7% and 3.0% respectively, to RM1.06bn, RM71.5m and RM62m.

1QFY17 Core Earnings Down 4.4% Yoy to RM200m

EBITDA margin weakened to 35.1% in 1QFY18 from 35.5% in 1QFY17, attributable to lower revenue contribution and higher operating costs. 1QFY18 core net profit declined by 4.4% yoy to RM200m, which was largely within our expectation but higher than consensus, accounting for 26% of our FY18 forecast and 28% of the street’s respectively. Also, Astro announced an interim DPS of 3.0 sen, similar to 1QFY17.

Maintain BUY With An Unchanged Target Price of RM3.16

Astro has taken on 11 new M3B transponders this week, which will provide the company the platform to launch more channels. We leave our FY18-20 core EPS forecasts unchanged as there were no major surprises in Astro’s 1QFY18 results. We maintain our BUY rating on Astro with an unchanged DCF-derived 12-month target price of RM3.16. We continue to like Astro as we expect earnings will continue to grow going forward and the forecast of 4.9% FY18E dividend yield, looks attractive in our view. 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 - 15 Jun 2017