Falling subscriber numbers pose risk to Astro earnings

Several research houses have revised downwards the company's earnings forecast for FY24-FY25.

PETALING JAYA: Declining television subscribers and average revenue per user or Arpu is anticipated to continue impacting Astro Malaysia Holdings Bhd’s earnings, going forward.

This is due to economic hardship, as consumers brace for a higher inflationary environment and a potential recession, possibly leading to lesser disposable income.

The company could also face higher content costs in financial year 2025 (FY25) due to the Olympic Games, said UOB Kay Hian (UOBKH) Research.

Besides that, Astro will have to account for higher depreciation costs arising from set top boxes provided to customers and 12 newly-launched transponders on the Measat 3d satellite.

All these factors and its weaker earnings for FY23 have led several research houses to revise downwards their earnings forecast for FY24-FY25.

UOBKH Research has downgraded its 2024-2025 core net profit forecast by 14% and 23%, respectively. RHB Research cut its FY24-FY25 core earnings by 14% to 15%, mainly to factor in weaker advertising expenditure (adex) propensity and higher inflation-adjusted operational expenditure.

Hong Leong Investment Bank Research reduced its FY24/FY25 forecast by 19.5% and 14.7%, respectively, and downgraded its call from a “buy’’ to a “hold’’ with a lower target price (TP) of 59 sen from 95 sen previously.

It added that Astro has done much to turn the group around, acquiring many excellent streaming platforms, launching Astro Fibre, as well as addressable advertising.

Maybank Investment Bank Research expects FY24 earnings before interest, taxes, depreciation and amortisation margins to return to only about 28% or lower than that of FY22 at 31%.

TA Research said going into FY24, Astro’s earnings are expected to rebound 40.4% year-on-year, anchored by lower content cost in a non-major sporting year.

MIDF Research said overall, it was maintaining a positive outlook on Astro, as its prospects remained promising, with the potential to benefit from an improved adex environment that is likely to be driven by the reopening of the economy.

Kenanga Research, meanwhile, is maintaining its FY24 earnings. It also maintains its dividend payout ratio estimate of 75%.

CGS-CIMB Research took comfort in Astro’ subscription revenue and broadband sales, which picked up (quarter-on-quarter) qoq in 4QFY1/23.

The research house noted that despite its first quarterly core net loss in 4QFY1/23, Astro seemed recharged during its post-results conference call.

“We believe this was due to its subscription revenue ticking up 1.4% qoq in 4QFY1/23. Astro admitted that the number rose partly because non-sports pack subscribers bought the World Cup Pass in 4QFY1/23, but it also gained new subscribers and got existing subscribers to take up higher-value packages.

“Plus, the 55.6% qoq jump in Astro TV segment’s ‘other’ revenue in 4QFY1/23 came from increasing paid subscribers for the sooka streaming service and Astro Broadband users,” it said.

“In our view, this showed that its ‘new Astro’ transformation strategy is working. Reiterate add with a lower DCF-based target price of 86 sen,” it added.

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Astro , subscribers , earnings , depreciation , platforms


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