- We initiate coverage on Astro Malaysia Holdings, with a
HOLD and a fair value of RM2.89/share, based on a 10% discount to our DCF value
of RM3.21/share.
- On the revenue front, growth will be supported by:- (1)
Growing subscriber base by net additions of 147k-228k p.a., implying penetration
of 48%-51% for FY13F-FY15F; and (2) Higher ARPU boosted by HD, arising from the
migration of existing subscribers to B.yond STB by end-FY14F. As such, HD
take-up rate is estimated to hit 38% in FY13F and jumping to 45% in FY14F,
followed by 55% in FY15F – translating into residential ARPU of RM93 and RM97
for FY13F and FY14F, respectively. Notwithstanding this, the recent NJOI rollout
is a positive, targeting the lower
income segment and rural areas. We assume NJOI ARPU of RM2 and RM4 for FY14F
and FY15F, respectively.
- Nonetheless, we expect EBITDA margin to shrink to 31% in FY13F
from 36% on the back of higher operating expenses stemming from:- (1) Rising
content cost from the recent Euro 2012 and London Olympics. We assume content
cost to rise to 35% from 32% in FY13F and thereafter, remain steady at 33% (inclusive
of rights of BPL); and (2) Step-up of customer acquisition cost (CAC) arising
from STB conversion by 5% and 8% for FY13F and FY14F, respectively. After that,
we expect CAC to remain flat.
- Having said that, Astro’s earnings are expected to remain
under pressure in the medium term, particularly for FY13F and FY14F because:-
(1) Depreciation and amortisation of the B.yond STB is estimated to jump by
17%-32% in the next three years; and (2) Finance cost is expected to climb by
more than 100% in FY13F, resulting in earnings dipping by 30%. This is mainly
underpinned by higher vendor financing on the back of the rising number of B.yond
STB conversions, finance lease for satellite transponders and a new satellite,
MEASAT 3B, in FY15F. Nevertheless, we project earnings to rebound by 19% in
FY15F.
- Astro is committed to paying out at least 75% of earnings starting
from FY14F onwards. But, based on our estimates, DPS is 6.4 sen, translating
into an unattractive dividend yield of 2.4%. Our projection shows that FCF will
only rise meaningfully from FY16F onwards, as capex cycle would peak in FY15F.
FCF yield stands at 4.7% in FY14F.
- We opine that any upside in dividends would kick-in after
two years as Astro is unlikely to leverage on its balance sheet to gear up for
dividends given that capex has not stabilised. Net gearing is within 50%-55%
for FY13F-15F. Net debt/EBITDA ratio was comfortable at 2.3x as at end-FY12,
and is projected at 2.0x for FY13F.
- Our HOLD view is underpinned by its monopoly position – conquering
99% of the pay-TV in Malaysia and strong franchise value due to superior
content portfolio.
Source: AmeSecurities
No comments:
Post a Comment