Astro posted a weaker 3QFY21 headline net profit of RM164.5m, down 3.6% YoY, dragged by decrease in subscription and advertising revenue as well as higher merchandise cost. After stripping out the unrealized forex gain of RM13m, Astro’s YTD 9MFY21 core net profit came in at RM378m. Results were in line with forecasts, accounting for 73% and 74.4% of our and consensus estimates respectively. While the industry continues to face headwinds due to structural changes and deteriorating adex, Astro remains committed to focus on cost optimization and strengthening the group’s value proposition to seize opportunities in commerce, broadband, digital and OTT. Our Outperform call and TP of RM1.38 is maintained as Astro remains an attractive dividend play. On that note, Astro declared a third interim dividend of 1.5sen, bringing the total YTD dividend declared to 4.0sen.

• 3QFY21 revenue at RM1.1bn (-8.9% YoY, +1.5% QoQ). The lower revenue was mainly due to the lower contribution from both TV and Radio segment, which was affected by the decline in subscription revenue and advertising take up rates. Nevertheless, growth in the home-shopping segment (+18.9% YoY) helped to partially cushion the negative impact from TV and Radio segment. Pay TV ARPU declined further to RM97.6 (from RM99.9). However, we are not overly concerned as the dip was mainly due to a one-off RM40 rebate given to Astro’s Sports Pack customers that was largely recognized in the current quarter. While advertising revenue is lower by 23.9% YoY, advertising revenue surged by 58.8% QoQ on the back of the pick-up in business activities and revival of Astro’s key signatures which includes local and vernacular content.
• 3QFY21 core net profit at RM151.5m (-14.3% YoY, +26.6% QoQ). The decline in 3QFY21 core net profit was mainly attributable to higher merchandise cost, selling and distribution costs as well as broadband costs. Meanwhile, core net profit improved on a QoQ basis largely due to the lower merchandise costs, license, copyright and royalty fees.
• Outlook. While Go Shop is benefiting from the increase in viewership and change in consumer behavior, we think that the growth is not sufficient to cushion the risk of decline in subscription and advertising revenues in the near-term. Nevertheless, the revival of sporting events especially the UEFA 2020 and Tokyo Olympics 2020 could potentially maintain or attract new subscribers moving forward. In addition, on-going cost optimization initiatives should partially mitigate the impact on lower revenue.

Source: PublicInvest Research - 4 Dec 2020