Astro Malaysia Holdings Bhd's disappointing year-to-date (up to nine months) results for FY2024/25 given weak TV subscription revenues, coupled with an uptick of the third-quarter marketing cost applied towards the launch of the new TV package, Astro One, have led to a downward revision of the group's target price, reported Kenanga Investment Bank Bhd (Kenanga Research). Note: FY2024/25 refers to financial year ending 31 January 2025
While maintaining the UNDERPERFORM call, Kenanga Research has lowered Astro's target price by 14% to RM0.20 from RM0.23.
As at 11:05am Dec 12, Astro's shares traded at RM0.23. (Stock updates from Bursa Malaysia)
Based on Kenanga Research's disclosed figures, Astro's 9-month YTD core net profit of RM52.7 million underwhelmed, compared to RM106 million recorded during the corresponding financial period in FY2023/24, coming in at 46% of its full-year forecast and 58% of the full-year consensus estimate. The less-than-expected Q3 profit figure was mainly due to higher marketing costs to support the launch of its new Astro One product line-up.
On a brighter note, Astro's quarterly adex (advertising expenditure) recovered from its historical low recorded in the previous quarter, and sequential subscriber base expanded for the first time in three years (since Q3FY2020/21). Kenanga Research has reduced the FY2024/25 and FY2025/26 earnings forecast by 23% to 24%.
Astro revealed that total action value from fines, settlements and prosecutions of sellers' illicit streaming devices and illegitimate subscription gains totalled at RM809,000 in the first half of FY2024/25. Additionally, in a recent piracy civil case against a local pub, the court awarded ASTRO RM75,000 in statutory damages without prior settlement.
Analysts remain cautious for a number of reasons. For one, the potentially hefty erosion in shareholders' funds of an estimated 63% if ASTRO is unsuccessful in its appeal against the IRB's additional assessment totalling RM735 million. Also, Astro faces intense competition from OTT streaming platforms for international content and FTA TV for vernacular content and the group's inflated cost base that includes expenses such as ongoing payment of lease costs to the MEASAT satellite. In addition, competition is coming from digital music streaming platforms that leverage artificial intelligence (AI) to offer curated content and targeted commercials. (IRB: Inland Revenue Board; OTT: Over the top; FTA: Free to air)
