KUALA LUMPUR (Sept 26): Analysts covering Astro Malaysia Holdings Bhd have cut target prices (TPs) and earnings forecasts for the pay-TV provider, following disappointing results for the second quarter ended July 31, 2023 (2QFY2024).

Astro shares hit an all-time low in the early session on Tuesday, after the results. The counter opened two sen lower at 49 sen and hit its all-time low of 46.5 sen, before paring losses to trade at 47.5 sen, still down 3.5 sen or 6.86% in the early session. It closed down 4.5 sen or 8.82% at 46.5 sen, with a market capitalisation of RM2.4 billion.

It saw 31.25 million shares exchange hands, compared to its 200-day average volume of 7.52 million shares, and almost 11 times higher than the 2.81 million shares that were transacted the previous trading day.

Astro’s net profit declined 75.98% in 2QFY2024 to RM23.65 million, from RM98.47 million a year earlier, dragged by higher operating costs and unfavourable foreign exchange (forex) loss.

Quarterly revenue fell 5.56% to RM869.82 million, as compared to RM921.12 million previously, due to a decrease in subscription revenue and merchandise sales.

For the first half of 2024 (1HFY2024), Astro’s net profit was down 80.08% to RM39.55 million versus the RM198.48 million it registered in the same period last year. Cumulative revenue was 6.49% lower at RM1.76 billion, from RM1.88 billion a year ago.

In a note, Hong Leong Investment Bank (HLIB) Research said that Astro’s results came below expectations and missed the research house and consensus’ expectations of full-year forecasts.

Given the results shortfall, HLIB Research has lowered its FY2024 until FY2026 forecasts and maintained its “hold” rating on Astro, with a lower discounted cash flow (DCF)-based target price (TP) of 50 sen (from 59 sen previously).

“Astro has done much to turn the group around, acquiring many excellent streaming platforms, along with launching Astro Fibre, as well as addressable advertising.

“However, the continued uncertain economic outlook could continue to hamper demand for the group’s products,” it said.

Kenanga Research also cut its FY2024-FY2025 forecast earnings for Astro, to reflect higher content costs and interest expense.

The research house maintained its “market perform” call but revised Astro’s TP to 56 sen (from 66 sen previously).

“We continue to like Astro, given the normalisation of content costs in FY2024 due to the absence of major sporting events, subscriber retention and ARPU (average revenue per user) boost from new fiber broadband bundles, and highly cash generative operations, given subdued capex (capital expenditure),” it said.

Nonetheless, Kenanga noted that consumer sentiment remains tepid amid inflationary pressures and a sluggish economic outlook for Astro.

Public Investment Bank (PublicInvest) Research also cut Astro’s FY2024 until FY2026 earnings forecasts by an average of 15%, as it raised its net finance cost assumption.

The research house has revised down its terminal growth rate assumption, leading to a downward revision in its DCF-based TP to 59 sen, while maintaining a “neutral” call on Astro.

“In view of the challenging operating environment, we expect Astro to conserve cash and declare a lower dividend payout of 50% (FY2023 was 60%), translating to a yield of 5% for FY2024 forecast,” PublicInvest Research said.