1HFY21 CNP of RM227m (-36% YoY) and 1.5 sen interim dividend are deemed to be within expectation in anticipation of better performance in 2HFY21. A now stabilised television performance could see recovery from the resumption of local content productions and live international events. Maintain OP with a TP of RM0.830. Limited capital upside is made up by the attractive c.7% dividend yields.

1HFY21 broadly within expectations. Normalised PATAMI of RM227m made up 41% and 43% of our and consensus estimates, respectively. We deem this to be broadly within expectation as we anticipate 2HFY21 earnings to make up for the lull in the MCO-depressed 1HFY21 period. An interim dividend of 1.5 sen was declared (YTD: 2.5 sen), also as anticipated.

YoY, 1HFY21 turnover declined by 13% to RM2.14b mainly owing to poorer television revenue (-15%) from lower subscriptions and adex. YTD, TV ARPU registered at RM98/mth (from RM100/mth in 1HFY20). Radio advertising also fell greatly (-49%) as advertising appetite was suppressed during the economic downturn. On the flipside, the Home Shopping segment expanded (+38%), benefitting from a more homebound population and closure of retail outlets. EBITDA declined (-20%) in tandem with revenue. Subsequently, normalised 1HFY21 PATAMI fell to RM227m (-36%) from higher finance charges.

QoQ, 2QFY21 revenue which tipped slightly (+4%) saw a stable performance from the television segment, boosted by a 52% growth in Home Shopping revenue. This on top of lower content cost during the quarter, as content production was mostly paused due to MCO restrictions, led to better core PATAMI of RM120m (+12%).

More to come. With the easing of movement controls, the group looks to reinvigorate its customer acquisition strategies with local content production resuming. With heightened adoption of the Ultrabox (over 100k installed), the group is better positioned to implement newer customer experience and promote push video-on-demand consumption. The resumption of international and sports events (i.e. EPL) could also once again keep its viewers sticky and staying subscribed to ASTRO. Meanwhile on the freemium front, NJOI is progressively introducing more prepaid packs to retain more budget conscious viewers.

Post-results, we leave our FY21E/FY22E earnings relatively unchanged.

Maintain OUTPERFORM with a TP of RM0.830. Our TP is based on an unchanged 9.0x FY22E PER (1.5SD below the stock’s 3-year mean). We believe we have sufficiently factored in impact of coming economic adversities to the group’s performance. Though our TP offers little capital upside, this is made up by its solid dividend yields of c.7% (even at our TP) which could attract medium-term investors. This should comfort investors whom are also cautious of the upcoming content cost in FY22 and FY23 owing to the delay in global sporting events.

Risks to our call include: (i) lower-than-expected subscription, (ii) lower-than expected adex revenue, and (iii) higher-than-expected content cost and operating expenses.

Source: Kenanga Research - 17 Sept 2020