1QFY23: In Line; Lower Revenue Contribution From All Segments
Astro booked 1QFY23 core net profit of RM119m (-19% yoy; -9% qoq) as TV, adex and
home shopping recorded a lower revenue base in the quarter. Accounting for 23% of
our full-year forecast, the results are in line, in our view. We expect a stronger 2H as it
coincides with World Cup 2022 – an opportunity to upsell for the TV and adex
segments. Content cost is fully hedged for FY23. The stock offers an attractive
dividend yield of 8%. Maintain HOLD with a target price of RM1.03.
RESULTS
? 1QFY23 results within expectations. Astro Malaysia (Astro) delivered 1QFY23 core net
profit of RM119m (-19% yoy, -9.2% qoq). The decline was due to: a) -2% yoy subscriber
base, b) lower advertising revenue (-24% qoq), and c) lower home shopping revenue base.
1QFY23 earnings account for 23% for both our and the street’s full-year forecasts
respectively, and we deem the results to be within expectations.
? Stock offers attractive dividend yield of 8%. The group declared a 1st interim dividend of
1.25 sen/share for the quarter (about 65% payout of headline net profit). We project FY23
net DPS of 7.4 sen/share, translating to a dividend yield of 8%. Management reiterated its
commitment to pay out a minimum of 75% of net profit as dividends.
STOCK IMPACT
? 1QFY23 revenue fell 9% yoy and 7% qoq to RM962m. Astro experienced lower revenue
contribution across all segments. TV subscription revenue fell 5% yoy and 3% qoq to
RM796m. Subscriber base fell 2% yoy to 5.5m. Positively, 1QFY23 ARPU jumped slightly to
RM97.4/month (4QFY22: RM97.2/month) as Astro managed to upsell its packages with
better value packages.
? Enterprise segment. Astro experienced recovery in terms of higher take-up from the
hospitality segment (with hotels resuming business and activities given the incoming
international travellers). That said, the F&B segment continued to suffer from weak
sentiment as opening hours were fixed at 11pm until May 22.
? Soft consumer market affected home shopping segment. GoShop revenue (-53% yoy;
-19% qoq) saw the steepest decline among the segments owing to economic reopening and
lower interest in online shopping as consumers opt for physical visits to stores instead.
? Advertising revenue was sequentially weaker owing to lower TV and radio advertising
revenue with the festive Chinese New Year period in 4QFY22. The decline can also be
attributed to businesses cutting back on advertising expenses given weak business
sentiments. Management launched Astro addressable advertising in Jun 22 to offer targeted
advertising based on AI-data analytics.
? Astro launched the Astro Fibre plan that allows customers to sign up for stand-alone
broadband or content plus broadband bundles. On a low base, broadband customers went
up 50% yoy. Astro believes that the bundle packages offered to customers will provide better
value and encourage take-up in the longer run.
? FY23 outlook. Given that FY23 is a major sporting year, we expect higher content cost of
36-37% of revenue (which is fully hedged in terms of US$/MYR). We expect a stronger
2HFY23 as Astro gears up for the Asian Games and the highly anticipated FIFA World Cup
in Qatar.
? Capex outlook. For FY23, Astro expects infrastructure capex spending at around RM300m.
Key investments in FY23 include: a) technology infrastructure across OOT & digital, TV and
video-on-demand, b) customer experience, and c) product and service upgrade.
EARNINGS REVISION/RISK
? No changes to our earnings forecasts.
VALUATION/RECOMMENDATION
? Maintain HOLD with a DCF-based target price of RM1.03 (WACC: 9.4%, terminal growth:
-1%). Our target price implies 10x FY22F PE.
? Key re-rating catalysts for the stock include: a) higher-than-expected dividend payout for
FY23, b) higher-than-expected pay-TV ARPU, and c) favourable regulatory outlook in light of
the crackdown on piracy.