KEY INVESTMENT HIGHLIGHTS

• 9MFY21 normalised earnings dropped by -19.5%yoy but within our expectation, accounting for 75.3% of our full year estimate

• Lower top-line was mainly due to the decline in revenue from subscriptions (-9.3%yoy) and advertising (-18.8%yoy) segments

• Home-shopping segment showed an improvement

• 9MFY21’s total dividend amounted to 4.0sen per share

• Maintain BUY with unchanged target price of RM0.96

Within expectations. Astro Malaysia Holdings Bhd’s (Astro) registered 9MFY21 normalised earnings at RM372.0m, -19.5%yoy lower than the same period last year (9MFY20: RM461.9m). The decline in earnings was primarily due to lower revenue derived from its subscriptions and advertising segments but partially compensated by merchandise sales. The 9MFY21 normalised earnings came in within expectations as it corresponded to 75.3% and 72.5% of our and consensus full year estimates respectively.

Astro’s top-line dragged by lower revenue from subscription and advertising segments during the quarter. Astro’s 3QFY21 top-line was lower by -8.9%yoy to RM1.11b as a result of lower subscription and advertising revenue to RM807.3m (-9.3%yoy) and RM77.0m (-18.8%yoy) respectively. Considering the third wave of Covid-19 pandemic and the implementation of the CMCO, we opine that the subscriptions revenue to continue to be muted on the assumption that some of its existing subscribers may opt out and convert to an alternative cheaper platform as a way to conserve their cash flows. Note that Pay-TV ARPU has slightly declined by -0.4%qoq to RM97.6 from RM98.0, attributable to the effect of the one-off sports pack rebate granted during the period.

Home-shopping’s top-line for the quarter higher by +18.9%yoy. Go Shop has shown an improvement by recording larger growth in its topline by +18.9%yoy to RM110.7m as compared to RM93.1m in 3QFY20. This was primarily attributable to higher viewership and the shift of consumers to online shopping. In regards to home shopping’s resilient current performance, we opine that this segment to continue to assist in supporting the group’s financial performance moving forward.

Earnings forecasts. We made no adjustments to our forward earnings as the 3QFY21 financial results were in line with our expectation. We maintain our earnings estimates for FY21, FY22, FY23 unchanged at RM493.9m, RM581.8m, and RM644.6m respectively.

Dividend. Third interim single-tier dividend of 1.5 sen per ordinary share was declared for FY21. The entire amount of RM78,217,601 is expected to be paid on 30 December 2020. Altogether, the group has announced 4sen/share dividend for FY21 (1 st interim: 1.0sen, 2nd interim: 1.5sen and 3rd interim: 1.5sen), accounting for 80% of our full year estimate.

Target price. We are maintaining our target price of RM0.96 per share, pegging its FY22 EPS of 11.2sen per share to PER of 8.6x (which is the group’s two-year historical average).

Maintain BUY. We expect the Group’s earnings outlook to be muted, considering the possibility of lower subscription due to still subdued consumer sentiment as well as competition from alternative cheaper platform. However, we foresee home shopping segment to continue to assist in supporting the group’s financial performance moving forward. We maintain our BUY recommendation on Astro. The unchanged TP implies expected total return of +16.4%.

Source: MIDF Research - 4 Dec 2020