Astro Malaysia (Astro) reported a net profit of RM47m for 3QFY25 compared to a net loss of RM40.6m in 3QFY24. This is due to lower net financing costs driven by favourable unrealised foreign exchange from unhedged lease liabilities. However, after stripping off non-operating items, normalised net profit sank to RM1m from RM42m a year ago. For cumulative 9MFY25, normalised net profit stood at RM52m, coming in below market as well as our full-year estimates of RM115m and RM122m respectively. We attribute this to lower-than-expected pay TV subscriber base, lower advertising revenue and higher operating cost. As such, we slash our FY25-27F earnings forecasts by an average of 30%. Our DCF-based TP is revised down to RM0.25. We maintain our Neutral rating on Astro.

• 3QFY25 revenue fell 9.5% YoY, mainly due to an 8% decline in TV subscription revenue while advertising revenue was down 30%. Radio revenue was also weaker, falling by 7% YoY. The decline was mainly due to muted consumer sentiment, with clients opting for caution in advertising spend. Also, we believe competition from the non-traditional digital platforms have resulted in market share loss for Astro.
• 3QFY25 normalised net profit slumped to just RM1m, in tandem with the decline in revenue. Content cost has increased from 35% in 3QFY24 to 37% in the current quarter. Meanwhile, EBITDA margin fell by 1 ppts to 21%, impacted by higher marketing allocation for new TV packs and provision for doubtful debt.
• Outlook. Despite 2024 being a major sporting year (i.e. Olympics and UEFA EURO), adex has not increased meaningfully. We attribute this to the weak consumer sentiment as well as intense competition from the non-traditional digital platforms. In addition, competition from other video streaming services is expected to further erode Astro's market share in the pay TV segment. While we believe content cost should ease in FY26F due to a more favourable exchange rate, topline growth is expected to be restricted by a challenging industry landscape.

Source: PublicInvest Research - 12 Dec 2024