KUALA LUMPUR (April 12): Astro Malaysia Holdings Bhd’s shares rose to the highest in nearly one month as CGS International reiterated its contrarian call and bet that dividend payouts could rise to 20% by January 2025, as the pay-television operator completes its cost-cutting efforts.
Shares of Astro rose as much as 6.5% or two sen to 33 sen in morning trades on Friday, its highest since March 18, 2024. The stock was last trading at 32.5 sen at 10.20am, after 6.8 million shares changed hands. In contrast, the telecom-and-media sector was slightly lower, while the country’s benchmark index FBM KLCI was down 0.1%.
CGS International, the sole research house out of 12 with a “buy” call, is projecting that Astro’s free cash flow could rebound to between RM350 million and RM400 million in the 12-month ending January 2026 (FY2026) and FY2027, from below RM300 million in FY2025.
The strong free cash flows “provide room for reinstatement of dividends,” said CGS International, noting that the company declared a dividend per share of just 0.25 sen for FY2024, which translates into a 6% payout despite reporting “healthy” cash generation.
Analyst consensus remained broadly cautious, with six out of 12 telling investors to sell the stock, while another five have a “hold” rating, and only CGS International recommended a “buy” call, according to Bloomberg. The consensus’ 12-month target price is 31 sen.
Astro closed its FY2024 with record-low profits since its listing in 2012, as content cost surged with the strengthening US dollar and revenue fell with lower subscriptions, advertising, programming rights sales, and cessation of its Go Shop operations.
The company has laid off 20% of its staff, and CGS International noted that the slew of cost-cutting measures that also included increasing digitalisation, appears to be starting to bear fruit, given that the margin on earnings before interest, tax, depreciation and amortisation (Ebitda) has widened 123 basis points to 37.2% in FY2024.
Dividend payout could rebound further to 50% by FY2026 and FY2027, as core net profit possibly surges 72% in FY2026 and 24% in FY2027 on annual cost savings, even as revenue falls, the house said. Ebitda margin should expand to 37%-46% in FY2025-FY2027, it noted.
Shares of Astro have tumbled 22% so far this year, continuing the downward spiral after losing more than half of its market value since 2021, as the company battled cord-cutting amid competition from internet-streaming services, such as Netflix.
“The acute share price weakness is warranted,” CGS International said, but the house now sees Astro’s shares trading at a “deep discount” of 3.5 times the forward enterprise multiples versus its 10-year average of 6.2 times. The house has a target price of 49 sen, which implies 4.7 times the enterprise multiples.