Astro posted a weaker 1QFY21 core net profit of RM146.4m (-32% yoy) but it was within our expectations. The drop in earnings was mainly due to a lower contribution from advertising and subscriptions. We expect the subsequent quarters to remain challenging for Astro, as advertisers remain cautious on the economic environment and more subscribers are down-trading to cheaper packages (potentially due to an increase in the unemployment rate and lower disposable income). On the other hand, we believe this will be partly mitigated by cost-saving initiatives. We make no changes to our FY21-23E core EPS forecasts. Maintain our HOLD rating and TP at RM0.90 for Astro.

1QFY21 Core Net Profit at RM146.4m, Within Expectations

Astro’s 1QFY21 revenue declined by 14.7% yoy to RM1.05bn, as a lower contribution from its TV and radio businesses was partially cushioned by a higher revenue contribution from its home-shopping division. In particular, TV subscriptions in 1QFY21 were down 11.5% yoy, partly as a result of continued down-trading to lower packages and a weaker ARPU of RM99.1 vs. RM100.40 in 1QFY20, while advertising revenue was lower by 38% yoy to RM90m as advertisers pulled back on spending. EBITDA margin was weaker at 34.5% in 1QFY21, down 4.1ppt yoy, due to higher content costs, merchandise costs and staff-related costs. Astro’s 1QFY21 PBT, which includes impairment on receivables and forex loss, plunged by 57.3% to RM96.8m. After excluding one-off items, Astro’s 1QFY21 core earnings came in at RM146.4m (-32% yoy), accounting for 25.9% of our FY21E estimate – within expectations.

Sequentially PBT Impacted by Forex Loss and Impairment

On a qoq basis, revenue was lower by 14.1% to RM1.05bn due to lower contributions across all segments (TV, radio and home shopping), while PBT declined by 50.6% to RM96.8m. Excluding one-off items, Astro’s 1QFY21 core net profit was higher by 13.8% qoq to RM146.5m. Astro, however, announced a lower interim DPS of 1 sen, from 2 sen in 1QFY20.

Source: Affin Hwang Research - 19 Jun 2020