Astro outlook challenging despite clearing tax issue


PETALING JAYA: Media and entertainment outfit Astro Malaysia Holdings Bhd’s outlook remains uncertain in the face of the decline in pay-TV subscriptions and challenging advertising expenditure (adex) landscape.

This is despite having settled with the Inland Revenue Board (IRB) over tax assessment issues for the years 2019 to 2023, according to analysts.

The company, in a filing with Bursa Malaysia last Friday, said that it had reached a settlement for the taxes for two subsidiaries for a revised assessment amounting to RM114.95mil from an initial assessment of RM734.88mil announced by the IRB last July.

Analysts pointed out to the decline in pay-TV subscriptions and weak adex continuing to pressure earnings.

Maybank Investment Bank Research (Maybank IB) said cost-of-living issues stemming from higher electricity tariffs and the RON95 subsidy rationalisation expected from the second half of this year might hamper the push for more pay-TV subscriptions.

The research house noted that the company would reconsider reinstating dividend payouts after the settlement with the IRB.

The possible earnings rise from the narrowing of the net pay-TV churn this year could hopefully be turned into net pay-TV additions through its NJOI subscription-free viewers upgrading to the pay-TV option.

It estimated that adding more subscribers would require six to 12 months to break even and drive long-term growth, with the current penetration rate in the country being 65%.

Maybank IB has forecast nil dividend payout going forward and estimated net pay-TV churn of 3% per annum.

“Thus, we expect Astro’s earnings outlook to remain challenging,” it said, reiterating a “sell” call on the stock but with a higher target price for the shares of 12 sen from 11 sen.

Hong Leong Investment Bank (HLIB) Research has maintained a “sell” call on the stock and the target price of 13 sen unchanged.

The research house said Astro’s management had guided that the settlement would not have any impact on the profit and loss statement for the financial year ended Jan 31, 2025, or subsequent financial years.

“This indicates that the tax liabilities and associated deferred tax assets, primarily arising from unabsorbed capital allowances on production-related expenditure, have already been fully recognised in prior periods,” HLIB Research said.

It added that the financial impact of the settlement would be contained within the balance sheet, with no incremental hit to earnings going forward.

“Overall, this resolution provides clarity and finality to the tax matter, removing a lingering uncertainty,” HLIB Research pointed out.

The outcome also reduced potential downside risks and reflects positively on the company’s tax governance.

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