9MFY21 CNP of RM380m (-28% YoY) and 1.5 sen interim dividend are deemed to be within expectations. The group has been able to sustain earnings with the return of advertising revenue boosted by an increasing take-up in home-shopping, against declining ARPUs. However, further tightening of movement controls and ensuing slower economic activity could adversely change that. Downgrade to MP with an unchanged TP of RM0.830. Dividend yield at c.7% is viewed still as attractive.

9MFY21 within expectations. 9MFY21 normalised PATAMI of RM380m came within our/consensus expectations, making up 70%/75% of respective estimates. An interim dividend of 1.5 sen (YTD: 4.0 sen) was declared, also as anticipated.

YoY, 9MFY21 revenue decreased by 12% to RM3.25b, no thanks to television contributions dipping by 14% from lower subscriptions and adex. YTD, television ARPU came in at RM97.60/mth (from RM99.90/mth in 9MFY20). Radio adex suffered (-42%) as advertising activities was dampened by movement controls and a softer economic environment. That said, the Home Shopping segment grew by 31% as a more homebound population skewed their purchasing to non-physical options. In line with the lower top-line, 9MFY21 normalised PATAMI came in at RM380m (-28%).

QoQ, 3QFY21 revenue continued to recover sequentially (+2%). Though television subscriptions are tapering off slightly (-2%), this is made up by better advertising appetite in television (+45%) and radio (+86%). Thanks to better cost and tax rates exposures during the period, this translated to a Core PATAMI of RM153m (+28%).

On less shaky grounds. With the easing of movement controls, the group looks to reinvigorate its customer acquisition strategies with local content production resuming. Customer experience should also improve going forward with the greater flexibility in viewing options and more local film contents as producers look elsewhere with the closure of cinemas. Broadband partnerships with Maxis and Allo continue to funnel in new customers especially with the increased home-based working and living arrangements recently. Meanwhile on the freemium front, NJOI is progressively introducing more prepaid packs to retain more budget conscious viewers. That said, due to the uncertainties brought by Covid-19, the group might see more customers down-trading to address financial matters of personal affordability with corporations tightening their advertising budget.

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

Downgrade to MARKET PERFORM with an unchanged TP of RM0.830. Our TP is based on an unchanged 9.0x FY22E PER (1SD below the stock’s 3-year mean). With the rise in its share prices from heightened sentiment, we recommend investors to hold onto their positions as the current risk-to- reward appears to be evenly weighted. In other words, we believe the capital downside risk could be mitigated by strong dividend prospect of close to a 7% yield. At the moment, we are cautious of the upcoming content costs in FY22 and FY23 owing to the delay in global sporting events.

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

Source: Kenanga Research - 4 Dec 2020