ASTRO (6399) - Astro Malaysia - Better times ahead
Target RM3.70 (Stock Rating: ADD)
Astro’s FY1/15 core net profit was in line with expectations at 102% of our and 101% of consensus estimates, driven by higher ARPU, subs growth and better content monetisation. Nevertheless, we see potential risk toward Astro’s earnings given the challenging economy outlook and weak consumer sentiment. Therefore, we cut FY16-17 EPS forecasts by 5-7% to account for gradual pay-TV subs addition and a higher-than-expected effective tax rate from its home-shopping start-up. However, we still like Astro for its resilient operating model and dominant position. We maintain Add with a slightly lower DCF-based target price of RM3.70 (WACC 8%). It remains our top pick in the sector. Rising ARPU growth from value-added services, higher licensing income and stronger contribution from home shopping are potential catalysts.
Commendable FY15 highlights
Revenue in FY15 grew by 9.2% yoy, driven by a 2% increase in pay-TV subscribers from 3.4m to 3.5m and higher ARPU growth of 3.1% from RM96 to RM99. EBITDA margin grew by 0.9% pts from 33.7% to 34.6% in FY15 on the back of disciplined cost management initiatives and lower marketing and distribution expenses. Astro posted a stronger core net profit of RM519m vs. RM448m last year, despite having recorded a significantly higher effective tax rate of 28.7% vs. 21.3%. It also declared a higher interim and final dividend of 4.25 sen in 4QFY15 (vs. 3 sen in 4QFY14), bringing total dividend in FY15 to 11 sen, ahead of our expectation of 10 sen.
Better times ahead
We were negatively surprised by lower ARPU guidance of RM101 in FY16 during Astro conference call as management expects 2-3% ARPU growth following the HD fees hike in Dec 14 and gradual pay-TV subs growth of about 60k-70k in FY16. Hence, we have reduced our pay-TV subs add from 80k to 60k. Management also highlighted the need to be a platform-agnostic content provider in order to stay relevant. We like the group’s strategy to develop this and have better opportunities for content monetisation. We are also excited with the new home shopping business as it provides new source of revenue.
We maintain Add
Accumulate. Astro’s growth prospects are intact given its dominant market position, with a 63% penetration rate and the sticky nature of its subscribers.
Source: CIMB Daybreak - 31 March 2015
Target RM3.70 (Stock Rating: ADD)
Astro’s FY1/15 core net profit was in line with expectations at 102% of our and 101% of consensus estimates, driven by higher ARPU, subs growth and better content monetisation. Nevertheless, we see potential risk toward Astro’s earnings given the challenging economy outlook and weak consumer sentiment. Therefore, we cut FY16-17 EPS forecasts by 5-7% to account for gradual pay-TV subs addition and a higher-than-expected effective tax rate from its home-shopping start-up. However, we still like Astro for its resilient operating model and dominant position. We maintain Add with a slightly lower DCF-based target price of RM3.70 (WACC 8%). It remains our top pick in the sector. Rising ARPU growth from value-added services, higher licensing income and stronger contribution from home shopping are potential catalysts.
Commendable FY15 highlights
Revenue in FY15 grew by 9.2% yoy, driven by a 2% increase in pay-TV subscribers from 3.4m to 3.5m and higher ARPU growth of 3.1% from RM96 to RM99. EBITDA margin grew by 0.9% pts from 33.7% to 34.6% in FY15 on the back of disciplined cost management initiatives and lower marketing and distribution expenses. Astro posted a stronger core net profit of RM519m vs. RM448m last year, despite having recorded a significantly higher effective tax rate of 28.7% vs. 21.3%. It also declared a higher interim and final dividend of 4.25 sen in 4QFY15 (vs. 3 sen in 4QFY14), bringing total dividend in FY15 to 11 sen, ahead of our expectation of 10 sen.
Better times ahead
We were negatively surprised by lower ARPU guidance of RM101 in FY16 during Astro conference call as management expects 2-3% ARPU growth following the HD fees hike in Dec 14 and gradual pay-TV subs growth of about 60k-70k in FY16. Hence, we have reduced our pay-TV subs add from 80k to 60k. Management also highlighted the need to be a platform-agnostic content provider in order to stay relevant. We like the group’s strategy to develop this and have better opportunities for content monetisation. We are also excited with the new home shopping business as it provides new source of revenue.
We maintain Add
Accumulate. Astro’s growth prospects are intact given its dominant market position, with a 63% penetration rate and the sticky nature of its subscribers.
Source: CIMB Daybreak - 31 March 2015
