AMID sequential decline in subscription revenue which is only poised to accelerate, Maybank IB Research has downgraded Astro Malaysia Holdings Bhd to “sell” (while retaining its target price at 29 sen) despite the once distinguished satellite TV operator managed to churn out 7% rise in net earnings for its 1Q FY1/2025 ended April 30, 2024.

This comes amid concerns that weak consumer sentiment will trigger the rationalisation of more subsidies which could negatively impact the group’s subscription revenue again despite the research house applauding Astro’s move to offer Hong Kong’s TVB and Liga Malaysia content to its basic pack subscribers,

“Although 1Q FY1/20255 core net profit of RM25 mil (-60% yoy; -29% qoq) was 23% of our FY1/2025 estimate, it was below our expectation as we have expected 2Q FY1/25 to be weak due to high content cost driven by the UEFA Euro Cup and Summer Olympics,” commented analyst Yin Shao Yang in a results review.

“1Q 1/FY2025 earnings shortfall was driven by adex (advertising expenditure) falling 13% yoy. In fact, 1Q FY1/2025 core net profit was only 14% of consensus’ FY1/2025 estimates.”

Elsewhere, Kenanga Research is maintaining its “underperform” rating on Astro with a lower target price of 25 sen (from 27 sen) premised on a combo of “continued pay-TV subscriber rout, ARPU (average revenue per user) pressure, weaker adex and high operating leverage drag on yoy bottom line”.

The research house further offered three reasons for its cautious stance in Astro:

Also reiterating its “sell” stance on Astro with a target price of 30 sen (from 36 sen previously), TA Securities Research has gone ahead to lower its FY2025F/FY2026/FY2027 earnings estimates by 34.7%/50.4%/44.8% upon slashing pay-TV subscription revenue while raising content cost to reflect the station’s actual 1Q FY1/2025 results.

“Astro remains committed to its strategic initiatives to reverse and stabilise the prolonged decline in pay-TV subscription revenue,” opined the research house.

“However, progress has been gradual, underscoring the challenging nature of the transformation efforts. Moreover, we anticipate that persistent macro-economic challenges will hinder the near-term recovery of its crucial pay-TV subscription and advertising revenue streams.”

At 11.52am, Astro was down 2 sen or 5.88% to 32 sen with 34.44 million shares traded, thus valuing the company at RM1.67 bil. - June 26, 2024

https://focusmalaysia.my/could-a-slew-of-sell-call-be-tell-tale-sign-that-astro-malaysias-sunset-biz-is-beyond-reconciliation/