Friday, 15 March 2013

Astro Malaysia - Short-Term Pain, Long-Term Gain

Astro Malaysia Holdings’ (Astro) FY13 earnings were within our forecasts but below consensus estimates. Group revenue rose 10.9% y-o-y but this was offset by higher marketing and distribution expenses. Still, the growth in Pay-TV adex and the group’s tie-up with Maxis may enhance its prospects and boost its future outlook. We upgrade Astro to a BUY, with a slightly lower revised FV of RM3.36.

Within expectation. Astro’s full-year FY13 earnings of RM418.0m (-33.6% yo-y) were within our forecast but fell below street estimates by some 9%. Although its bottom-line shrank y-o-y, the top-line grew by a strong by 10.9% y-o-y, mainly due to the stronger numbers from its other business segments –Pay-TV (+11.2% y-o-y) and radio (+23.9% y-o-y). Its Pay-TV average revenue per user (ARPU) showed an encouraging 4.7% y-o-y growth to RM93.20 from RM89.00 in 2012. That said, due to higher expenses incurred as a result of rising marketing and distribution costs due to aggressive customer acquisition and the B.yond swap out, Astro’s EBITDA and earnings growth pace mellowed to a slower +0.2% and -33.6% y-o-y respectively.

Pay TV adex numbers on the rise. As Astro’s pay-TV adex base is small, a significant growth from this may not be meaningful. Nonetheless, we believe that moving forward, advertisers may start raising their allocation for this segment due to: i) its relatively lower advertising cost, ii) a growing share of the Pay-TV market that they cannot afford to neglect, and iii) Pay-TV subscribers are generally from the middle income segment, which is the largest group of consumers in the country. As such, Astro may be able to benefit from this trend and its FY13 adex revenue has so far showed positive growth.

Source: RHB

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