- We re-affirm our HOLD recommendation on Astro Malaysia
Holdings, with an unchanged fair value of RM2.89/share, based on a 10% discount
to our DCF value.
- Astro reported a net profit of RM118mil (+25% QoQ) for its
3QFY13, bringing 9MFY13 earnings to RM335mil (-29% YoY). The results were
broadly within expectations, accounting for 76% of our FY13F earnings and 73%
of consensus.
- A surprise dividend of 1.5sen per share was declared –
ahead of its guidance to pay dividend starting FY14F. This was backed by a
strong set of 9MFY13 result and strong free cash flow generation. Moving
forward, management intends to reward shareholders on a quarterly basis,
premised on a payout ratio of 75% of earnings. As such, we have assumed DPS of
3.0 sen for FY13F and maintain our FY14F-FY15F DPS assumptions.
- The spectacular topline growth (+12% YoY, 0.9% QoQ) was
driven by:- (1) Increase in pay-TV subscribers, totalling 3,213k (+6.6% YoY,
+1.5% QoQ); (2) 78% YoY increase in net additions, circa 146k; and (3) ARPU
climbing by 5.6% YoY to RM92 from RM87, underpinned by growing demand for its value-added services.
- As anticipated, EBITDA margin has compressed to 32%-33%.
This declined is expected to continue in the next two years mainly due to cost
associated with the acceleration of migration of the B.yond set-up box and
promoting higher take-up of new products and services. Take-up rate for HD
services has been encouraging to-date, whereby 64% of B.yond subscribers are on
it, translating into additional RM20 per month in ARPU. Additionally, 13% are equipped
with Personal Video Recorder and 36% subscribe to the SuperPacks. Conversely,
the NJOI rollout in April has achieved a total of 132k subscribers. FTA
channels – TV3 and TV9 – will be added in 4QFY13, while additional sports and
movies offerings are to be launch soon.
- Management is confident completing the migration of the
remaining subscribers to the B.yond set-up box by end-FY14F. This, in turn,
will drive a higher take-up of the value-added services and thereby further
out, boost ARPU growth. We have assumed ARPU hitting RM93 (+5.2%) and RM98 (+5.6%)
in FY13F and FY14F, respectively.
- In conjunction with Maxis, the launch of the triple-play
service – an IPTV service via fibre optic – is targeted for April next year.
Two months thereafter, Astro On-the-Go bundling with Maxis mobile and broadband
services, are expected to be launched. As part of the soft launch (targeted in 4QFY13),
the group will begin trial in high-rise condominium buildings and have started
booking some.
- Astro’s business model is currently undergoing a
reinvestment stage, hence our HOLD recommendation. We continue to be positive,
underpinned by its virtual monopoly in the Pay-TV segment countrywide and
growing franchise value driven by superiority in content portfolio.
- Our projection suggests that the capex cycle would peak in
FY15F. Hence, we see that the free cash flow build-up will only rise meaningful
from FY16F onwards. FCF yield stands at 4.2% for FY14F, with a strong net cash
position of RM2.2bil as at 9MFY13.
Source: AmeSecurities
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