AmInvestment Research retains Hold on Astro

KUALA LUMPUR:  AmInvestment Research is maintaining its Hold call on Astro Malaysia, with an unchanged fair value of RM3.05 a share, based on a discounted cashflow valuation. 

It had on Thursday raised its FY17F by 24% on account of Astro's gain in adex market shares in the TV and radio segments. 

“The strong on-year improvement in the nine months net profit stemmed from smaller losses in the home shopping business, lower depreciation and lower finance cost. 

“We note that Astro had a lower depreciation because most of the HD set-top boxes were fully depreciated,” it said. 

AmInvestment Research said notwithstanding a soft advertising expenditure (adex) market, Astro's 9MFY17 revenue saw a 3.5% uptick on-year. 

Astro's year-to-date TV adex and radio expenditure (radix) were up 5% and 6% on-year respectively despite total gross adex in Malaysia declining 1%. 

This was attributed to a three percentage point gain in share of both TV adex and radex on the back of higher radio listenership and TV viewership respectively.

In the TV segment, the Pay-TV subscriber base recorded a negative net addition for third straight quarters, with a net churn of 50k subscribers this quarter. 

 “On another positive note, 9MFY17's home shopping revenue grew by 59% on-year while profit before tax (PBT) margin narrowed from -14% to -6%. 

“Quarter-on-quarter, we understand that the revenue fell 16% due to festive season promotion in the preceding quarter.

“Management guided that GoShop is expected to break even by the end of FY17 and swing into the black next year,” it said. 

AmInvestment Research said Astro will also continue to expand in Asean via its OTT VOD service, Tribe, which was recently launched in the Philippines and currently operating in Indonesia. 

This will allow Astro to tap into another growth segment and reduce reliance on Pay-TV subscription. 

“Astro is trading at a CY17F PE of 20 times, two standard deviation below its three-year historical average, while Sky UK trades at a CY17F PE of 13 times,” it said.