Astro Malaysia (Astro)’s FY14 net profit of MYR448m was within our and street  estimates.  Its  topline  grew  12%  y-o-y,  mainly  owing  to  higher household  penetration,  increased  ARPU  and  higher  adex  contribution. The  group  is  targeting  to  improve  profitability  through  various  income streams,  as  well  as  effective  cost  management.  We  revise  our  FV  to MYR3.45 on updating its latest numbers. Maintain NEUTRAL.  
 
Within  expectations. Astro’s FY14 net profit of MYR448m  made  up 102%/98% of our/consensus full-year forecasts respectively. Its revenue rose 12%  y-o-y,  mainly  attributed  to:  i)  higher  household  penetration,  ii) an increase in average revenue per user (ARPU) to MYR96 (+3% y-o-y), and  (iii)  higher  adex  contribution  of  MYR582m  (+15%  y-o-y).  FY14 EBITDA climbed 16% y-o-y but its bottomline only improved by 7% y-o-y. The single digit growth in bottomline was due to higher depreciation and amortisation expenses arising from a higher cumulative number of Astro B.yond set-top boxes (STBs) capitalised and depreciated. Other revenue (radio  and  adex)  also  saw  positive  growth  in  the  financial  year  under review.  Astro  declared  a  dividend  of  2  sen  for  the  quarter  under  review and  a  final  dividend  of  1  sen.  Altogether,  the  company  has  declared dividends totaling 9 sen for FY14.

Improving  profitability.  Moving  forward,  other  than  focusing  on improving  its  average  revenue  per  user  (ARPU)  –  targeting  MYR100  in FY15, and MYR125 in five years’ time, which is in tandem with its target higher  penetration  rate  (80%  on  6.9-7.7m  household),  Astro  is  also expanding its revenue stream including: i) the JV with South Korea’s GS Home  Shopping  Inc,  ii)  aggressively  increasing  adex  income  with  the aim to double that in FY15, and iii) expanding its transponder capacity in 2HCY14  to  provide more  content  to  maintain  and  expand its  subscriber base.  

Maintain  NEUTRAL,  FV  revised.  We  made  slight  adjustments  to  our revenue  assumptions  as  we  update  its  latest  numbers  and  incorporate management’s  guidance,  with  the  net  profit  for  FY15F  adjusted  slightly higher by 5%. However, to be prudent, we have conservatively included higher  content  cost  assumptions  for  the  World  Cup  broadcasting  rights (37% vs guidance of 35% of TV revenue). We adjust our DCF-based FV to MYR3.45 from MYR3.36 previously, Maintain NEUTRAL.

Financial Exhibits

SWOT Analysis

Astro  has  the  first-mover  advantage  in  the pay-TV  business  in  Malaysia.  It  continues  to expand  by  offering  various  value-added services and through strategic partnerships

Company Profile

AMH is the largest Pay TV operator in Malaysia.

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Source: RHB