Astro’s 9MFY13 core earnings pipped our expectation but were in line with consensus as we were overly aggressive with our content and marketing expense assumptions. The 9M highlights were: i) the robust +12% y-o-y revenue growth, ii) 6% y-o-y rise in blended ARPU to RM92.30, and iii) a maiden dividend of 1.5 sen/share. In view of our earlier conservative projections, we are now lifting our FY13-FY15 earnings forecasts by 5%-12%. We continue to like Astro’s monopoly in the domestic pay-TV space. Reiterate BUY recommendation, but with a higher revised RM3.40 FV, based on FCFF valuation (WACC: 8.45%, TG: 1.5%).
Ahead of OSK but within street estimates. Astro’s 9MFY13 core earnings were ahead of our estimates but within consensus’ numbers, making up 84% and 73% of the respective full-year forecasts. The group’s 9M revenue grew by a robust 12% y-o-y, propelled by higher subscription of its B.yond HD services. However, the migration of its existing subscribers to the HD-enabled platform weighed down its bottom-line by 29% y-o-y). Its EBITDA margin, meanwhile, compressed by 550 bps y-o-y on escalating content costs (+15% y-o-y) and marketing expenses (61% y-o-y). Other takeaways were:
Ahead of OSK but within street estimates. Astro’s 9MFY13 core earnings were ahead of our estimates but within consensus’ numbers, making up 84% and 73% of the respective full-year forecasts. The group’s 9M revenue grew by a robust 12% y-o-y, propelled by higher subscription of its B.yond HD services. However, the migration of its existing subscribers to the HD-enabled platform weighed down its bottom-line by 29% y-o-y). Its EBITDA margin, meanwhile, compressed by 550 bps y-o-y on escalating content costs (+15% y-o-y) and marketing expenses (61% y-o-y). Other takeaways were:
- A strong 9M pay-TV net subscriber addition of 146k vs 82k in the corresponding period last year. Overall, the increase was attributed to the success in its marketing and advertising efforts in luring greenfield customers.
- Blended average revenue per user (ARPU) continued to rise (to RM92.30) in 3Q on the back of rising take-up of B.yond HD services. Currently 65% of its subscribers with B.yond set-top boxes (STBs) installed have purchased HD content.
- Declared a maiden dividend of 1.5 sen/share for the quarter under review, equivalent to a 65% payout on the group’s 3Q EPS. The dividend will be paid on 11 Jan 2013. As management has reiterated its target of a minimum dividend payout of 75%, we expect a larger payout in 4Q.
Maintain BUY, FV tweaked up slightly to RM3.40. The better-than-expected results prompt us to revise upward our FY13-FY15 earnings forecasts by 5%-12% as we had been overly conservative earlier. Despite the near-term blip due to rising content cost (after securing BPL broadcasting rights) and higher fixed expenses associated with subscribers opting for B.yond STBs, we continue to like Astro’s monopoly in the domestic pay-TV segment. All in, we nudge up our FV slightly to RM3.40, based on FCFF valuation (WACC: 8.45%, TG: 1.5%). Hence, we maintain our BUY recommendation on the stock.
FYE Jan (RMm)
|
FY11
|
FY12
|
FY13f
|
FY14f
|
FY15f
|
Revenue
|
3,664.1
|
3,888.8
|
4,177.8
|
4,368.8
|
4,906.9
|
Core Profit
|
823.5
|
624.1
|
435.7
|
454.5
|
466.6
|
% chg y-o-y
|
34.1
|
-24.2
|
-30.2
|
4.3
|
2.7
|
Consensus
|
457.1
|
513.5
|
616.1
| ||
Core EPS (sen)
|
15.8
|
12.0
|
8.4
|
8.7
|
9.0
|
DPS (sen)
|
12.4
|
14.8
|
6.3
|
6.6
|
6.7
|
Dividend yield (%)
|
4.2
|
5.0
|
2.1
|
2.2
|
2.3
|
ROE (%)
|
71.6
|
129.2
|
84.6
|
72.3
|
62.6
|
ROA (%)
|
25.2
|
9.6
|
6.4
|
6.5
|
5.3
|
PER (x)
|
18.7
|
24.7
|
35.4
|
34.0
|
33.1
|
BV/share (sen)
|
22.1
|
9.3
|
9.9
|
12.1
|
14.3
|
P/BV (x)
|
13.4
|
32.0
|
30.0
|
24.6
|
20.7
|
EV/EBITDA (x)
|
11.4
|
13.2
|
12.5
|
11.8
|
10.7
|
Results Table (RMm)
FYE Jan
|
3Q13
|
2Q13
|
3Q12
|
Q-o-Q
chg (%) |
Y-o-Y
chg (%) |
9M13
|
9M12
|
Y-o-Y
chg (%) |
Comments
|
Revenue
|
1,078.4
|
1,068.9
|
995.3
|
0.9
|
8.3
|
3,133.4
|
2,811.2
|
11.5
|
Flat q-o-q due to the marginal drop in advertising revenue, coupled with tepid subscription growth.
|
EBITDA
|
341.5
|
358.4
|
355.8
|
-4.7
|
-4.0
|
1,041.6
|
1,088.2
|
-4.3
|
Due to higher subscriber acquisition cost.
|
Depreciation
|
-161.4
|
-138.1
|
-111.2
|
16.9
|
45.1
|
-423.4
|
-305.1
|
38.8
| |
EBIT
|
180.1
|
220.3
|
244.6
|
-18.2
|
-26.4
|
618.2
|
783.1
|
-21.1
| |
Interest income
|
9.6
|
13.9
|
3.1
|
-30.9
|
209.7
|
46.4
|
12.8
|
262.5
| |
Interest expense
|
-33.3
|
-105.4
|
-94.5
|
-68.4
|
-64.8
|
-208.0
|
-137.9
|
50.8
|
Drop q-o-q due to the early retirement of debts.
|
Associates
|
2.1
|
1.1
|
-0.6
|
90.9
|
nm
|
3.6
|
-1.0
|
nm
| |
PBT
|
158.5
|
129.9
|
152.6
|
22.0
|
3.9
|
460.2
|
657.0
|
-30.0
| |
Tax
|
-40.5
|
-34.8
|
-47.7
|
16.4
|
-15.1
|
-123.8
|
-181.5
|
-31.8
| |
MI
|
0.1
|
-0.7
|
-1.4
|
nm
|
nm
|
-1.6
|
-3.5
|
-54.3
| |
Reported Net profit
|
118.1
|
94.4
|
103.5
|
25.1
|
14.1
|
334.8
|
472.0
|
-29.1
| |
Core Net Profit
|
118.1
|
94.4
|
103.5
|
25.1
|
14.1
|
334.8
|
472.0
|
-29.1
| |
Reported EPS (sen)
|
2.3
|
1.8
|
2.0
|
6.4
|
9.1
| ||||
DPS (sen)
|
1.5
|
0.0
|
0.0
|
1.5
|
0.0
|
Maiden interim dividend of 1.5 sen/share.
| |||
Reported EBITDA margin (%)
|
31.7
|
33.5
|
35.7
|
33.2
|
38.7
| ||||
OTHER CONFERENCE CALL TAKEAWAYS
HD services to benefit over longer term. Management said it is looking to lure 200k pay-TV subscribers to migrate to the B.yond STB platform in 4Q and is targeting for 1.3m new B.yond customers next year. This initiative bodes well for Astro, given that its HD services can potentially fetch an incremental ARPU of RM20 over the longer-term. However, in the short-term, the group would have to bear the cost of the STBs, which will be capitalised and depreciated on a straight-line basis over three years. We understand that the take-up for Astro’s HD services has been encouraging so far, with 65% of its customers with B.yond STBs having subscribed for HD content in 3Q.
Figure 1: No. of subs and ARPU trend
Figure 2: No. of subs with B.yond STBs
Source : OSK, Company
EARNINGS FORECASTS
FYE Jan (RMm)
|
FY11
|
FY12
|
FY13f
|
FY14f
|
FY15f
|
Turnover
|
3,664.1
|
3,888.8
|
4,177.8
|
4,368.8
|
4,906.9
|
EBITDA
|
1,369.8
|
1,414.7
|
1,353.3
|
1,417.4
|
1,671.4
|
PBT
|
1,090.5
|
864.3
|
601.3
|
627.4
|
644.0
|
Core Profit
|
823.5
|
624.1
|
435.7
|
454.5
|
466.6
|
Core EPS (sen)
|
15.8
|
12.0
|
8.4
|
8.7
|
9.0
|
DPS (sen)
|
12.4
|
14.8
|
6.3
|
6.6
|
6.7
|
Margin
| |||||
EBITDA (%)
|
37.4
|
36.4
|
32.4
|
32.4
|
34.1
|
PBT (%)
|
29.8
|
22.2
|
14.4
|
14.4
|
13.1
|
Core Profit (%)
|
22.5
|
16.0
|
10.4
|
10.4
|
9.5
|
ROE (%)
|
71.6
|
129.2
|
84.6
|
72.3
|
62.6
|
ROA (%)
|
25.2
|
9.6
|
6.4
|
6.5
|
5.3
|
Balance Sheet
| |||||
Fixed Assets
|
1,695.9
|
5,107.8
|
3,717.1
|
3,788.3
|
5,334.8
|
Current Assets
|
1,573.5
|
1,406.0
|
3,047.4
|
3,212.2
|
3,529.1
|
Total Assets
|
3,269.4
|
6,513.8
|
6,764.6
|
7,000.5
|
8,863.9
|
Current Liabilities
|
1,047.5
|
1,776.9
|
1,961.1
|
2,089.3
|
2,292.4
|
Net Current Assets
|
526.0
|
-370.9
|
1,086.3
|
1,122.9
|
1,236.6
|
LT Liabilities
|
1,070.9
|
4,245.5
|
4,276.9
|
4,267.6
|
5,807.7
|
Shareholders Funds
|
1,150.9
|
482.9
|
514.7
|
628.3
|
745.0
|
Net Gearing (%)
|
14.4
|
669.2
|
282.0
|
202.1
|
335.9
|
Source: OSK
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