RHB Research has maintained a “Buy” recommendation for Astro Malaysia with a target price of RM1.17 from MYR1.37, 25% upside, c.8% dividend yield
The stockbroking firm said that Astro Malaysia’s 1QFY23 (Jan) results were in line and characterised by seasonality. “We see downside risks to earnings from heightened inflationary woes, with FY23-25F core earnings tempered,” it said.
RHB Research said that the group’s digital pivot and transformation plans remain key earnings catalysts, alongside concerted efforts to combat piracy. Astro trades at an inexpensive 4.7x FY24F EV/EBITDA (1.5SD below historical EV/EBITDA mean)
The stockbroking firm said that it has cut FY23-25F core earnings by 6-10%, mainly to factor in the downside from heightened inflationary woes on discretionary spending, renewed adex headwinds, and adjustments to our GO Shop assumptions.
It said that Astro has hedged its content costs for the next 12 months at MYR4.20-4.25. Content cost should ramp up in 2HFY23, driven by the quadrennial 2022 World Cup broadcast (21 Nov to 18 Dec) with content cost/TV revenue guided at 37% for the full year (sporting year).
RHB said that inflationary pressures impinging on consumer discretionary spending, weaker MYR, and protracted subscriber churn are notable risk factors.
It said that Astro scores highly on the ESG front with a leading social agenda via the Astro Kampus and Tutor channels on premium TV and NJOI, for which more than MYR126m has been invested in learning content since the inception in FY12.
