ASTRO MALAYSIA HOLDINGS BHD

By RHB Research Institute Buy (maintain) Target price: RM2.02

RHB Research believes the share price of Astro has bottomed out, following the sharp decline of about 52% year-to-date.

The brokerage maintains its “buy” call on Astro. But it has cut its target price for the counter to RM2.02 from RM2.30 previously after the group’s earnings for the nine months ended October 2018 fell short of the brokerage’s estimate.

Valuation-wise, RHB Research notes, Astro trades at an attractive 5.5 times the estimated enterprise-value-to-earnings before interest, taxes, depreciation and amortisation (EBITDA), which is below its historical mean.

In addition, the brokerage says the stock is supported by attractive dividend yields of 8%-10% for 2019-2019.

Meanwhile, RHB Research has cut its core earnings forecasts for Astro for financial years (FY) ending Jan 31, 2019, to 2021 by 11.4%; 10.8%; and 14% to factor in the management’s updated EBITDA margin guidance for FY19, lower subscriber growth/margin assumptions going forward and its latest house projection of US dollar-to-ringgit exchange rate.

The brokerage notes Astro has hedged its FY2020 content cost exposure at below the current spot rate.

“Management has embarked on a groupwide strategic review with the focus on cost optimisation. There could potentially be some one-offs in subsequent quarters, with opex savings from the exercise reinvested in growth areas,” RHB Research says.

“Astro has ceased its over-the-top (OTT) applications, Tribe (a regional OTT launched in 2016) and Tamago (live streaming platform launched in 2017) in response to the challenging market conditions,” it adds.

For the nine months of FY19, Astro’s revenue slipped a marginal 0.8% year-on-year (yoy), with continued decline in TV subscription (-4.3%) and radio revenues (-11%). TV net-additions of 173,000 year-to-date are tracking in line with the guidance of 250,000 net-adds for FY19. Adex revenue recovered strongly post the three-month tax holiday, up 10.7% quarter-on-quarter, while average rev- enue per user was steady at RM99.90 per month, supported by discretionary services.