Results

9MFY13 earnings contracted by 29% to RM334.8m (43.8 sen/share), making up 78% of ours and 73% of consensus’ estimates respectively.

Deviations

Largely in line.

Dividends

Net dividend of 1.5 sen/share declared. Ex-date on 19 Dec- 12, payment on 11 Jan-13. Highlights  Results review 9M revenue grew by 11% (YoY: +8%, QoQ: +1%) driven by strong ARPU and subscribers growth. However, earnings declined by 29% due to higher content costs, customer-related acquisition costs, and accelerated depreciation for its set top boxes. During the quarter, earnings grew by 25% QoQ (YoY: +14%) due to unrealised forex gain of RM30.6m. Adjusting for the forex effect, we estimate that quarterly earnings would have fell by 34% QoQ (YoY: -42%). 

Going B.yond Thus far, 1.77m viewers (55% of subscribers) have migrated to B.yond set top boxes. This is a positive trend as B.yond subscribers generate an additional ARPU of RM20/month, hence a revenue driver from the current ARPU of RM92.3/month. 

Maxis tie-up Management also clarified on their bundled package with Maxis whereby users will pay a monthly rate of RM300-350/month for both Astro and broadband services. Astro will keep its RM150 portion while claiming a guaranteed margin of 25% from Maxis’ RM150 portion. Although IPTV is still at the nascent stages, we believe that it will gain traction with the rollout of HSBB services nationwide. 

Capturing FTA TV NJOI households have grown to 132k. We believe that this is a strategic move by Astro to capture viewership from the FTA TV segment. This will allow the company to grow its Adex share and also generate additional revenue through its prepaid offerings. 

Target 6% ARPU growth... For FY14, management is looking at an ARPU growth of 6% with 200k subscriber net adds and 200k NJOI net adds.

Risks

Threat of new players; High content costs; and Regulatory risks.

Forecasts

Unchanged.

Rating

HOLD 

• Positives: (1) Monopoly of pay-TV; (2) Higher subscriber base through stronger penetration rate and ARPU growth through new product offerings. 
• Negatives: (1) Blocked from raising subscription rates; (2) High content costs.

Valuation

• Maintain TP of RM3.16 based on DCF with a WACC of 7.3%.

Source: Hong Leong Investment Bank Research - 06 Dec 2012