Decent FY2019 results for Astro, says research house

(Reuters pic)

PETALING JAYA: Pay TV operator Astro Holdings Bhd reported a core net profit of RM563 million for financial year (FY) 2019, which is within expectations, according to Kenanga Research.

The company had accounted for RM41 million in unrealised foreign exchange losses and RM58 million for its staff separation scheme for FY 2019.

Astro’s core net profit declined 17% year-on-year (yoy), mainly due to higher content costs during World Cup 2018 and unfavourable forex movements from unhedged finance lease liabilities.

The company declared a dividend of 1.5 sen per share for the final quarter, bringing the year’s total to 9 sen per share. In 2018, the company declared a dividend of 12.5 sen per share.

“Moving forward, Astro is set to deepen its value proposition for customers across multiple platforms with revenue diversification, deeper cost optimisation as well as an anti-piracy push as its key focus in FY20,” Kenanga Research said in a note today.

FY19 revenue weakened by 1% due to lower subscription (more lower-priced packages taken up) and advertising revenue (slower advertising market) but was partially offset by better merchandise revenue.

Turnover from its home-shopping segment climbed 29% to RM374 million due to the higher number of products sold (mainly driven by tactical campaigns) with a loss of RM6 million compared to RM15 million previously.

Astro recorded a total of 5.7 million (+4% yoy/+0.9% qoq or 77% household penetration rate) customer base as of end-4Q19, mainly supported by NJOI.

Despite the take-up of more lower-priced packages over the past few quarters, its blended average revenue per user has remained relatively stable at about RM100 over the past five quarters, suggesting that the group may have found an optimal price point for its packages.

Kenanga Research said challenges would remain for the company amid structural changes in the global content and media industry, aggravated by prevalent piracy.

Besides expanding its ecosystem around its core business, Astro plans to ride its key differentiator – its content – by deepening its strength in local vernacular and Asian originals through strategic partnerships.

The group will continue engaging with customers across platforms while enriching its vernacular (which accounted for 75% of its TV viewership) and live sport content.

The research house has an outperform recommendation for the company with a target price of RM2.00.