• Astro reported a core net profit of RM582.8m in FY21 (-15.3% yoy), which came in above our expectations due mainly to lower operating expenses
• Given the better FY21 results, we raise our FY21-23E core EPS by 4-4.2%, mainly to account for lower operating expenses and higher ad revenue. We expect FY22E earnings to be better on some normalisation of business activity, resumption of installations and the return of key content
• Maintain HOLD Rating But With a New TP of RM1.00

Sequentially Stronger Core Net Profit

On a qoq basis, Astro’s 4QFY21 revenue was generally flat at RM1.1bn (+0.16%) while PBT was lower by 2.5% qoq to RM201.7m due to lower profits at the TV and radio divisions that were partially mitigated by the higher profit at the home shopping division. Nevertheless, excluding one-off items and non-controlling interests, Astro’s 4QFY21 core net profit was at RM169.1m, up 11.5% qoq. Astro announced a higher DPS of 4 sen, bringing the total FY21 DPS to 8 sen (FY20: 7.5 sen).

FY21 core net profit at RM582.8m – above our and consensus expectations

Astro’s FY21 revenue fell by 11.2% yoy to RM4.4bn due to a lower contribution from its TV and radio businesses that was partially cushioned by higher revenue from its home shopping division. In particular, TV subscriptions were down as subscribers’ ARPU was lower at RM96.90 vs. RM100 in FY20, while advertising revenue was lower due to advertisers scaling back on ad spending during the COVID-19 pandemic (especially during the MCO period). EBITDA margin was weaker at 34.6% in FY21, down 1 ppt yoy, due to higher merchandise costs and staff related costs that were partially mitigated by lower content costs and license, copyright and royalty fees as a percentage of revenue. Astro’s FY21 PBT, which included impairments and forex gains, dropped 19.7% yoy to RM692.8m. Excluding one-off items, FY21 core net profit came in at RM582.8m (-15.3% yoy), which was above our expectations due mainly to lower opex.

Maintain HOLD But With a Higher TP of RM1.00

Given the better-than-expected FY21 results, we raise our FY22-23E core EPS forecasts by 4-4.2%, mainly to account for lower operating expenses and higher ad revenue. We expect FY22E earnings to improve on some normalisation of business activity, resumption of installations and a return of key content. As such, our DCF derived target price is raised to RM1.00 from RM0.94 previously, but we maintain our HOLD rating. We also introduce our 2024 forecasts.

Source: Affin Hwang Research - 25 Mar 2021