ASTRO (6399) : Astro Malaysia - Looking B.yond FY15
Target RM3.80 (Stock Rating: ADD)
Astro’s 9MFY15 annualised core net profit came in below expectations at 96% of our full-year estimate and 92% of consensus due to lower pay-TV subs growth and higher than expected effective tax rate. Despite this, 9MFY15 core net profit grew by 12.7% yoy, driven by higher ARPU and subscriber additions, along with licensing income. However, we cut our FY15-17 EPS forecasts by 3-7% to account for gradual pay-TV subs growth due to a challenging economic outlook in 2015. We maintain Add call with a lower DCF-based target price of RM3.80 (WACC 8%). Astro 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.
9MFY15 highlights
Revenue in 9MFY15 grew by 10% yoy, driven by a 2.3% increase in pay-TV subscribers from 3.40m to 3.48m and higher ARPU growth of 3% from RM95.6 to RM98.5. EBITDA margin grew by 0.2% pts from 34.1% to 34.3% in 3QFY15 on the back of disciplined cost management initiatives and lower content cost. Astro posted a stronger core net profit of RM379m vs. RM337m last year, despite having recorded a significantly higher effective tax rate of 27.6% vs. 24% in 9MFY14. Astro declared an interim dividend of 2.25 sen, bringing the total dividend in 9MFY15 to 6.75 sen, in line with our expectation of 10 sen.
An array of growth drivers
Although management is guiding for gradual pay-TV subs growth in the coming years, we believe that other growth drivers such as higher ARPU from value-added services, NJOI prepaid satellite TV, home shopping and content licensing could contribute towards Astro’s earnings growth. Moreover, the company remains focused on driving growth from its more affluent subs, which tend to be resilient during a challenging economic environment, by introducing new and innovative products such as the offering of eight new HD channels, Super Pack, video-on-demand (VOD) Astro Plus, etc.
We reiterate an Add rating
We maintain our Add rating on Astro, with a lower DCF-based target price of RM3.80. In spite of sluggish consumer sentiment, Astro’s growth prospects are intact given its dominant market position, with a 62% penetration rate, a defensive operating structure and the sticky nature of its subscribers.
Source: CIMB Daybreak - 12 December 2014
Target RM3.80 (Stock Rating: ADD)
Astro’s 9MFY15 annualised core net profit came in below expectations at 96% of our full-year estimate and 92% of consensus due to lower pay-TV subs growth and higher than expected effective tax rate. Despite this, 9MFY15 core net profit grew by 12.7% yoy, driven by higher ARPU and subscriber additions, along with licensing income. However, we cut our FY15-17 EPS forecasts by 3-7% to account for gradual pay-TV subs growth due to a challenging economic outlook in 2015. We maintain Add call with a lower DCF-based target price of RM3.80 (WACC 8%). Astro 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.
9MFY15 highlights
Revenue in 9MFY15 grew by 10% yoy, driven by a 2.3% increase in pay-TV subscribers from 3.40m to 3.48m and higher ARPU growth of 3% from RM95.6 to RM98.5. EBITDA margin grew by 0.2% pts from 34.1% to 34.3% in 3QFY15 on the back of disciplined cost management initiatives and lower content cost. Astro posted a stronger core net profit of RM379m vs. RM337m last year, despite having recorded a significantly higher effective tax rate of 27.6% vs. 24% in 9MFY14. Astro declared an interim dividend of 2.25 sen, bringing the total dividend in 9MFY15 to 6.75 sen, in line with our expectation of 10 sen.
An array of growth drivers
Although management is guiding for gradual pay-TV subs growth in the coming years, we believe that other growth drivers such as higher ARPU from value-added services, NJOI prepaid satellite TV, home shopping and content licensing could contribute towards Astro’s earnings growth. Moreover, the company remains focused on driving growth from its more affluent subs, which tend to be resilient during a challenging economic environment, by introducing new and innovative products such as the offering of eight new HD channels, Super Pack, video-on-demand (VOD) Astro Plus, etc.
We reiterate an Add rating
We maintain our Add rating on Astro, with a lower DCF-based target price of RM3.80. In spite of sluggish consumer sentiment, Astro’s growth prospects are intact given its dominant market position, with a 62% penetration rate, a defensive operating structure and the sticky nature of its subscribers.
Source: CIMB Daybreak - 12 December 2014
