Astro’s slipping TV subscriptions raises analysts concerns

KUALA LUMPUR: Astro Malaysia Holdings Bhd's (Astro) slipping TV subscriptions have raised concerns among analysts while the group's profit margin has been projected to come in below 10 per cent, moving forward.

In its latest results note on Astro, Affin Hwang Investment Bank Bhd (AffinHwang Capital) has voiced concerns over the group's slipping TV subscriptions.

The research firm pointed out that this would have a more detrimental impact on valuations should the decline accelerate.

“Unless there is a turnaround here, we would remain fairly cautious,” AffinHwang Capital said.

“Nevertheless, the pullback in the stock price and attractive dividend yields (7.7 to 8.1 per cent for financial year 2019-2021 (FY19-21E)) have turned the stock attractive for a short-term proposition.”

According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), historically, Astro has benefitted from the broadcasting of major sporting events.

“However, the escalating content cost has served as a double-edged sword for the group as seen in its latest quarterly earnings performance,” MIDF Research said.

Astro had recently highlighted that for the third quarter of FY19 (3QFY19), the group's profit after tax and minority interest (PATAMI) increased five per cent year on year (y-o-y) to RM153 million.

MIDF Research noted that the radio segment also performed poorly as their clients' advertising spending reduces.

However, the home shopping segment continues to gain positive traction as its lossmaking position continues to improve, the research also noted.

“Collectively, we expect these factors will put Astro in a difficult position to grow its profit margin and, thus, profitability.

“In the foreseeable term, we expect Astro's profit margin will come in below 10 per cent.”

Meanwhile, MIDF Research viewed that the healthy free cash flow would enable Astro to support the group's dividend commitment.

At this juncture, the research arm anticipated that the attractive dividend yield of more than seven per cent would help to partially buffer for the expected weakness in share price performance.