PETALING JAYA: Astro Malaysia Holdings Bhd’s disappointing FY2023 earnings, which saw a 43.79% tumble in net profit to RM259.04 million from RM460.88 million a year ago, has seen research houses cutting their target price for the pay-TV operator.
Revenue for the year under review fell 9.1% to RM3.8 billion from RM4.18 billion.
MIDF Research attributed the steep drop in net profit to a decline in merchandise sales, subscription revenue and advertising revenue.
“The FY2023 core PATAMI (profit after tax and minority interests) came in below our and consensus’ expectation, recorded at 54% and 74% of our and consensus full year estimates,” it said in a note today.
“The negative deviation was mainly attributed to deficient subscription revenue, advertising revenue, and merchandise sales, all of which did not meet our anticipated level,” it added.
MIDF noted that the television segment experienced a decline in revenue, reaching RM895.9 million (- 1.3% year-on-year/y-o-y) due to lower subscription and advertising revenue.
To account for this, MIDF has revised the forecasted FY2024 earnings downward by 46.1% to RM484 million.
Meanwhile, Kenanga Investment Bank Bhd noted that Astro’s earnings met their forecast, but did not meet their dividend expectations.
No dividend was declared in Q4 FY2023, leaving the full-year dividend at 3 sen, missing their expectation of 5.2 sen. This equated to a 60% payout ratio.
The group, in a filing with Bursa Malaysia, said this departure from its usual policy of 75% payout ratio was due to the RM763 million non-cash impairment of historical costs incurred by its subsidiaries in Q4.
As such, Kenanga has maintained their forecasted PATAMI for FY2024 and FY2025 at RM435 million and RM389 million respectively.
Kenanga trimmed its target price (TP) for Astro to 73 sen from 75 sen previously, and maintained a “market perform” call.
MIDF also revised its TP downwards to 89 sen from 95 sen, reiterating their “buy” call on the stock.
Outlook uncertain but not gloomy
Astro’s prospects stand to benefit from increased growth in its advertising expenditure (adex) radio brands, which garner weekly listeners through both FM and digital channels.
“The radio segment showed continuous growth with revenue of RM53.3 million (+16.7% y-o-y), mainly due to the steady number of weekly radio listeners (17.7 million),” said MIDF.
The robust performances of the TV, radio and digital platforms can be attributed to the year-end festivities and FIFA World Cup Qatar 2022.
However, Kenanga notes that the group continues to struggle with “costs and subscription numbers”.
“This initiative (to focus on adoption of Ultra and Ulti Boxes) is expected to impact the group at the balance sheet level, due to higher capex with the adoption of new technology and higher depreciation on shorter life spans for its existing equipment,” it added.
Nonetheless, the group is expected to have stable margins moving forward, barring any extraordinary events, of 28% at the earnings before interest, tax, depreciation and amortisation (Ebitda) level.
Whilst Astro remains the largest TV player in the region, key risks identified by Kenanga are competition from other legal and illegal streaming services, a weak ringgit and regulatory risks.
At 4.06pm today, Astro’s share price rose 4.5% or 3 sen to 69 sen, giving it a market capitalisation of RM3.6 billion.