KEY INVESTMENT HIGHLIGHTS

• 1HFY21 normalised earnings dropped -31.7%yoy but came in within our expectation, accounting for 48.7% of our full year estimate

• The lower bottom-line was mainly due to the decline in revenue in subscriptions (-11.3%yoy) and advertising (-49.2%yoy) segment

• Home-shopping’s top-line doubled by +59.9%yoy

• 1HFY21’s total dividend amounted to 2.5sen per share

• Upgrade to BUY with a revised target price of RM0.96

Within expectation. Astro Malaysia Holdings Bhd’s (Astro) recorded its 1HFY21 normalised earnings at RM240.7m, a -31.7%yoy drop from the prior corresponding period of RM352.4m. This came in within our but below consensus expectations at 48.7% and 39.7% of respective full-year FY21 earnings estimates. The decline in earnings was primarily due to lower revenue derived from its subscriptions and advertising segment but partially compensated by higher commerce sales from Go Shop and lower content cost due to fewer local content productions and deferment of the two major sporting events.

Subscription and advertising revenues continue to take the hit during the quarter. Astro’s 2QFY21 total revenue dropped by - 11.8%yoy to RM1.09b, as a result of lower subscription and advertising revenues to RM820.8m (-11.3%yoy) and RM80.1m (-49.2%yoy) respectively. We opine that the decline in subscriptions revenue could be partially attributable to some existing subscribers opted out or converted to an alternative cheaper platform as a way to conserve their cash flows. To note, NJOI’s ARPU for the quarter had increased at a range of 13%- 14% whereas the overall Pay-TV ARPU have slightly declined by - 1.1%qoq to RM98.0. We gather that the decline in the Pay-TV ARPU also includes the full effect of the one-off RM40 sports pack rebate granted during the quarter. Taking all these into consideration, with movement restrictions have eased further since June, this should result in the recommencement of live productions and on-ground events as well as resumption in installations of set-top-box within households. Therefore, we postulate a gradual recovery in the group’s advertising and subscriptions revenue in the intermediate-term.

Home-shopping’s top-line for the quarter doubles by +59.9%yoy. Go Shop, on the other hand, recorded huge growth in its top-line by +59.9%yoy to RM144.7m as compared to the corresponding quarter of RM90.5m. This was primarily attributable to the increase in viewership due to the MCO and the festive season during the quarter. In spite of the disruption of supply lines faced during the MCO, we note that Go Shop has since pivoted more towards health and wellness products, as well as fresh and frozen food in order to meet the increasing demand. In view of this, we postulate the home-shopping segment to continue to assist in supporting the group’s financial performance moving forward.

Source: MIDF Research - 17 Sept 2020