Analysts expect Astro key indicators to further improve
- Recent results show improvements in foremost indicators
- Delay of Measat 3B satellite tv for pc launch now not a main issue
ASTRO Malaysia Holdings Bhd's latest financial effects supplied traders more motives to be positive on the pay-TV operator’s outlook, as improvements were visible in foremost indicators.
For a begin, the corporation’s subscriber base extended via over 2% to a few.99 million subscribers versus three.88 million subscribers inside the fourth region of its 2014 economic 12 months, representing a TV household penetration rate of 58%. The growth become driven via each its NJOI and pay-TV segments. NJOI is Astro’s subscription-loose satellite TV service.
The increase in subscriber base did now not result in any dilution of its common sales per user (ARPU). In reality, for the primary region of fiscal 2015 which ended Jan 31, 2014, the pay-TV operator’s ARPU rose to RM97.1, versus RM96 in Q4 FY2014 and RM94.2 in the identical quarter a yr in the past. [RM1 = US$0.31]
“The higher ARPU was especially pushed via subscription fee increases in Q4 2014 and progressed take-up of valued-brought services,” Public Investment Bank analyst Lee Wee Sieng stated in a research report.
While Astro's subscriber base accelerated throughout the sector, its churn fee stood at nine.nine% [Q1 FY2014: 7.9%; Q4 FY2014: 9.9%].
“Astro is not overly involved approximately the higher churn price of nine.nine% given that 75% of clients stopped using its services involuntarily because of ignored bills and different [reasons]. Hence, the actual churn price become lower,” CIMB Investment Bank analyst Mohd Shanaz Noor Azam said in his file.
For the full monetary yr, Astro stated that it plans to boom its subscriber base via 450,000 to 500,000, comprising one hundred,000 to a hundred and fifty,000 new pay-TV subscribers.
“While this goal can be difficult for the reason that we count on greater fuel price and/ or electricity tariff hikes within the 2nd half of [calendar year] 2014, we accept as true with this is still workable because of the continued FIFA World Cup," said Maybank Investment Bank analyst Yin Shao Yang. “Past World Cup activities have had a effective effect on pay-TV internet adds.”
Besides displaying encouraging numbers on the subscriber cease, Astro also registered growth in sales, profits, margins and unfastened coins glide.
Astro announced that economic first quarter internet income rose thirteen% to RM129 million in comparison with RM114 million inside the identical area a 12 months in the past. Its revenue multiplied through eleven% to RM1.25 billion, versus RM1.1 billion within the first quarter of fiscal 2014. During the duration, its earnings earlier than hobby, tax, depreciation and amortisation (EBITDA) extended with the aid of one percentage factor to 35%.
Equally appealing turned into the organization’s unfastened coins go with the flow development. It now has a unfastened coins float of RM282 million, an development of 6%. This can be a signal of possible higher rewards to shareholders in phrases of dividends.
During its first zone results briefing to analysts, the business enterprise also revealed 3 extra info. First was that Astro continues to be going through operational demanding situations due to the lack of slot ability inside the Klang Valley and Penang, in phrases of its IPTV provider. It told analysts that talks are nonetheless ongoing with its partners to solve ongoing operational problems.
Second become the release of the Measat 3B satellite tv for pc being not on time to September. This way the pay-TV operator would want to defer the release of extra channels until new transponder ability becomes to be had.
“While Astro stands to keep RM50 million in capex (capital expenditure) and depreciation consistent with annum from the delay, this can defer its plans to introduce greater channels, impacting growth,” stated Yin.
Once the Measat 3B satellite tv for pc is released, Astro can have access to 18 transponders, giving it the capability to boom its offerings from the modern 179 channels to 245 channels.
Third changed into guidance for its new enterprise venture, home shopping. Astro stated it became concentrated on RM500 million in sales contributions from the house purchasing segment in the next four to five years, in addition to a 20% EBITDA margin according to annum. It is assumed that the employer could earn carriage charges and studio rentals of RM100 million to RM200 million a yr.
Astro signed a shareholder settlement with GS Home Shopping Inc to installation Astro GS Shop Sdn Bhd, 60% owned by means of Astro and forty% owned by means of GS Home. GS Home is a South Korean-primarily based agency specialising in the domestic shopping business.
“We consider it's far a superb flow through the organization to diversify its operations, and an amazing manner to leverage on its conveniently to be had facilities inclusive of the call centre, channel structures and production studio,” stated CIMB Investment Bank's Mohd Shanaz.
What ought to traders do?
Analysts were combined whilst it came to making suggestions to traders on what they should do with their Astro stocks.
Kenanga Research analyst Desmond Chong highlighted that Astro’s first region income had been underneath his studies house’s expectations. In fact, Chong downgraded the advice for Astro to 'Underperform' with a target price of RM3.10.
“Although the institution’s lengthy-time period potentialities look promising, its cutting-edge valuation appears to be overstretched with FY15 PER [Price to Earnings Ratio] of 32.2x, thus capping its capacity upside,” stated Chong.
PER is one of the measures to decide how highly-priced a inventory is. Companies having a excessive PER are usually deemed as more costly, especially if every other company in the identical enterprise is buying and selling at a drastically decrease PER.
While there's no different pay-TV operator indexed in Malaysia, Astro is now and again in comparison to different media organizations together with Media Prima Bhd, Star Publications (Malaysia) Bhd and others. These media companies have an average PER of approximately 15 instances.
Some analysts had been a piece more positive.
Kunal Vora, an analyst from BNP Paribas, maintained his 'Buy' call at the stock, but with a better target fee of RM4.00 as opposed to the previous target fee of RM3.fifty five.
“Astro’s margins are growing as its HD (excessive-definition) box deployment is concluding. We carry our FY15 and FY16E (financial 2016 estimates) EBITDA through 3% [to RM1.89 billion and RM2.1 billion, respectively] on higher margins and our goal fee to RM4.00 on higher EBITDA estimates and our discounted cash flow valuation rolling over to April 2015.
“At 9.8x FY16E EV/ EBTDA, we discover Astro attractive for its strong increase potentialities and marketplace dominance,” he stated.
EV/ EBITDA, like PER, is every other valuation multiple to degree the cost of a organisation. EV is Enterprise Value.
CIMB’s Mohd Shanaz additionally revised upwards his goal price for Astro. The research house now has a RM3.ninety goal price on Astro, as opposed to the RM3.60 formerly.
“We anticipate more potent earnings contribution within the coming quarters, driven via essential carrying events including the FIFA World Cup and Commonwealth Games. In addition, we anticipate the additional capability which is probable to come in FY15 to in addition help the organization’s boom method,” he said.
Other analysts who improved the target fee consist of Citi Research’s Petrina Chong, who raised the goal fee to RM4.29 (as opposed to the previous RM3.37), and Hong Leong Investment Bank’s Low Yee Huap, who raised target price to RM3.88 from RM3.72.
On June 20, Astro stocks on Bursa Malaysia fell by means of three.4% to RM3.38.
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