Divided opinion on Astro’s future
KUCHING: While Astro Malaysia Holdings Bhd (Astro) has managed to remain resilient amidst various headwinds affecting the media industry, analysts remain divided on whether or not their resiliency will go the distance.
In a report by MIDF Amanah Investment Bank Bhd ( MIDF Research), Astro’s earnings for the third quarter of financial year 2018 (3QY18) had come in at RM146.6 million.
This leaves the cumulative normalised earnings of the first 9 months of FY18 (9MFY18) to be within their full-year estimates at 70.6 per cent.
“Cumulat ively, 9MFY18 normalised earnings improved by +2.9 per cent year over year (y-o-y) to RM495.8 million.
“The improvement in 9MFY18 normalised earnings was supported by higher operational efficiency contributed by drop in content costs and lower cost to serve,” said the research arm.
Overall, MIDF Research believes Astro will continue to outperform by successfully expanding its customer base through a dual- model of premium and freemium market approach.
This has allowed the group to maintain bulk of its income stream from subscription revenue as oppose to advertising revenue which has taken a hit in recent times with the transition into digital media.
“In addition, the group also expanded its revenue stream by tapping into the consumer market through its home shopping business venture and its digital initiatives.
“Moreover, its continuous cost management strategy has also kept the operating cost at bay. As a result, it has strong cash generation capability which enables the adoption of a progressive dividend policy,” added the research arm.
On the other hand, HongLeong Investment Bank Bhd ( HLIB Research) was less optimistic and declared that they were remaining sceptical on Astro’s ability to regain subscription revenue as they opine that the pay- TV platform will remain challenging moving forward.
“Besides, the challenging business environment from aggressive shifts in the media platform from print to digital is leaving the company in a tough position,” added the research arm.
For the group’s television segment, its 9MFY18 revenue was reported to have fallen slightly by -2.0 per cent y-o-y to RM3,696.8 million due to the reduction in subscription and advertising revenue.
With that said, HLIB Research is maintain their ‘hold’ rating on Astro’s stock with an unchanged target price (TP) of RM2.49 post earnings adjustment based on a discounted cash flow vlauations with a weight average cost of capital of 8.4 per cent.
Meanwhile, MIDF Research is maintain their ‘buy’ rating with an unchanged TP of RM3.64, premised on pegging their target price earnings ratio of 26 fold against the FY19 earnings per share of 14.0 sen per share.
“At present, the stock offers an attractive dividend yield of more than 4 per cent which further elevates Astro’s attractiveness,” added the research arm.