Period

4Q16/FY16

Actual vs. Expectations

Above. Astro recorded 4Q16 PATAMI of RM204m, bringing FY16 PATAMI to RM615m (+18% YoY). By adding back the unrealised forex losses resulting from the revaluation of M3B transponder, Astro’s core PATAMI would have been RM662m (+28% YoY), constituting 119% of our, and 107% of consensus, full-year estimates.

Lower-than-expected content costs and unrealised forex losses were the key positive variances at our end.

Dividends

In-line. A total 3.75 sen (which comprised of a fourth interim single-tier dividend of 2.75 sen (with an ex-date at 4-April) and a final single-tier dividend of 1.0 sen) was declared, bringing full-year NDPS to 12.0 sen (FY15: 11.0 sen) which implies 94.5% dividend payout ratio. Key Result

Highlights

YoY, FY16 revenue grew 5%, driven by the Radio (+13%) and other segments (>600%). The former was mainly driven by effective yield and continuous strong listenership performance of its radio stations. The latter, meanwhile, was mainly boosted by its higher home shopping business (RM189m vs. RM25m a year ago). Its TV segment, meanwhile, saw revenue inching up by 1% underpinned by higher ARPU (RM99.3 vs. RM99.0 a year ago) and stable Pay-TV residential subscribers of 3.6m (+1%). The group’s EBITDA margin, meanwhile, increased by 0.8% to 35.5% due to lower installation costs and content costs as a percentage of revenue.

QoQ, 4Q16 revenue inched higher by 2% mainly driven by marginally higher subscription (as a result of higher ARPU by RM0.30 and improved Pay-TV net adds of 16k (3Q16: 14k)) and other revenue. The increase in other revenue is due to its higher merchandise sales of RM38m from home-shopping business but partially offset by lower licensing income of RM6.7m. EBITDA margin increased by 0.6% due to lower staff related costs, and lower impairment of receivables.

Outlook

Despite the challenging economic outlook, Astro has turned more optimistic on its FY17 outlook, underpinned by its strong home-shopping business performance and NJOI subscription.

Astro also provided its FY17 guidance as follows:- (i) a midsingle digit revenue growth, (ii) lower EBITDA (below FY16 level) and PAT (at low RM600m range), and (iii) similar or slightly better DPS. The margin pressure is expected to come from higher content costs as a result of additional sporting events.

Change to Forecasts

Post-results, we lowered our FY17E NP by 0.5% after finetuning our content costs estimate. Meanwhile, we also introduce our FY18E numbers, where we expect Astro’s net profit to growth 33% YoY on the back of higher home-business contribution, lower content and depreciation costs.

Rating

Downgraded to MARKET PERFORM from OUTPERFORM previously as the share price has hit our target price.

Valuation

We maintained our DCF-derived TP at RM2.93 based on a 10- year explicit DCF valuation with the following assumptions:- (i) WACC: 9.0%, (ii) Beta: 1.0, and (iii) Terminal growth: 1%. Our TP also implies a FY17E PER of 25.9x.

Risks

Lower-than-expected subscriber growth.

Higher content cost and forex fluctuation.

Source: Kenanga Research - 23 Mar 2016