KUALA LUMPUR, Sept 22 — MIDF Research foresees stronger earnings growth for Astro Malaysia Holdings Bhd (Astro), following the phased reopening of the economy which would support Astro’s advertising revenue.
The research house is also positive on the recent developments in the group, including the partnership with Netflix which it believes would bode well for Astro’s average revenue per user which has been on an upward trajectory.
“All factors considered, we maintain our ‘buy’ call on Astro. The downside risks to our call include lower-than-expected subscription and advertising expenditure (adex), and an increase in access to pirated streaming sites,” it said in a research note today.
In a filing with Bursa Malaysia on Tuesday, Astro reported a lower net profit of RM87.12 million in the second quarter ended July 31, 2021 (Q2 2022) from RM133.64 million in the same period a year ago.
Revenue dropped 2.8 per cent to RM1.06 billion from RM1.09 billion previously — mainly due to the decline in subscription revenue and merchandise sales — but this was offsetted by the increase in advertising revenue and sales of programming rights.
Advertising revenue registered a commendable growth of 23 per cent year-on-year (y-o-y) in the first half of the financial year ending Jan 31, 2022 (1H2022), outperforming industry growth of 11 per cent y-o-y.
Astro had also incurred higher content costs following the airing of EURO 2020 and the Tokyo Olympics which has led to a slight reduction of -0.5 per cent y-o-y in its earnings before interest, taxes, depreciation and amortisation margin.
Meanwhile, AmInvestment Bank said Astro’s weak Q2 2022 results could be cushioned by stronger earnings in 2H2022, riding on an adex recovery, underpinned by the relaxation of movement restrictions for fully vaccinated individuals.
“We continue to like Astro for its strength in vernacular content and high household penetration rate of 74 per cent in financial year 2021, move to expand offerings by aggregating streaming services via over-the-top (OTT) partnerships and launching of its own Sooka OTT and attractive dividend yield of 7.0 per cent — 8.0 per cent,” the investment bank said in a research note today.
At 11.57am, Astro’s shares eased two sen to RM1.03, with 3.54 million shares traded. — Bernama