Astro’s 9MFY16 (Jan) core earnings were in line with expectations, making up 79%/78% of our and consensus estimates. Maintain NEUTRAL, with revised a TP of MYR2.88 (from MYR3.07, 0.7% upside). Core earnings surged 23.1% YoY due to higher revenue and lower costs. Nonetheless, management has guided for a cautious outlook.

9MFY16 core earnings. Astro’s 9MFY16 core earnings were in line, at79%/78% of our and consensus estimates. Core earnings grew 23.1% YoY on higher revenue and lower costs. TV revenue rose 1.3% YoY from a higher ARPU of MYR99.30 (+MYR0.80) and higher net pay-TV adds (+24,000) as well as a better contribution from merchandise sales (Go Shop’s 9MFY16 revenue: MYR127m). EBITDA rose 7.9% YoY on lower installation and smart card rental costs. Still, earnings were hit by a MYR90.2m net unrealised FX loss related to USD150m in transponder borrowings. Stripping this out, 9MFY16 core earnings were MYR501.8m.

Cautious outlook. Astro has guided that, due to the weak MYR, itexpects an additional MYR150m-200m in content costs in FY17, where itforecasts MYR100m for the UEFA European Championship and Olympics in Brazil. Consequentially, content cost would increase to 37-38% of TV revenue vs our forecasted 32-35%. Further, due to the weaker-than-expected consumer sentiment, management has also toned down its guidance on net pay-TV adds to flattish growth in FY17 growth (previously 50,000). On the positive side of things, Astro lifted its Go Shop revenue target to MYR200m (from MYR150m) on the back of a better-than-expected home shopping experience in FY16F.

Strategy. Astro intends to focus on its premium clients segment to help drive ARPU growth, by introducing value-added services and focus on growth segments such as Njoi and Go Shop (where we forecast revenue to hit MYR500m by FY19). Astro also declared a 2.75 sen DPS, in linewith our forecast of 12-13 sen for FY16 (4.2% yield).

NEUTRAL. Adjusting for the updated assumptions, we cut FY17F-18Fearnings by 12-14%. While we favour Astro over the other Malaysian media players due to its resilient subscriber base, we remain cautious onthe outlook on consumer sentiment. NEUTRAL, while our revised DCF based TP of MYR2.88 (CoE: 9%, TG: 1%) implies 21.9x FY17F P/E.Astro is still trading below its comparable peer P/E average of 26.1x (see Figure 7). Risks include a weaker-than-expected consumer market.