KUALA LUMPUR (Dec 12): Astro Malaysia Holdings Bhd (KL:ASTRO) is still not out of the woods as weak revenue clouds its outlook, analysts said on Thursday while the pay-television operator’s stock hovered near record lows.
Net profit amounted to only about RM1 million after stripping out foreign exchange gains in the third quarter ended Oct 31, 2024 (3QFY2025), while core profit for the nine-month period was sharply below the consensus full-year estimate.
“Astro continues to face pressure from declining subscriptions and advertising revenue being unable to offset the decline”, even as the company entered the seasonally stronger period for advertising expenditure, said Hong Leong Investment Bank.
The research house kept the stock on a ‘sell’ call, flagging that earnings visibility remains shrouded by the persistent decline in subscriptions, amid cord-cutting trends and softening advertising expenditure.
Shares of Astro have declined 42% so far this year, as the company battled with intense competition from so-called over-the-top services such as Netflix that snatched away its subscribers. Further, subdued consumer and business sentiment have also dragged on advertising expenditure growth.
The stock paused for the midday trading break down 2.1% at 23 sen, after nearly 12 million shares changed hands. At the last price, the company had a market capitalisation of RM1.2 billion.
Analysts are also bearish on the stock with ‘sell’ outnumbering ‘buy’ calls five to two, following Maybank Investment Bank’s downgrade on Thursday.
“Astro is pricing its TV packs lower in an effort to regain subscribers,” Maybank said. “We understand its motivations, but are unsure when this effort will bear fruit.”
Further, a massive RM735 million additional tax bill is also hanging over Astro. “We remain cautious on Astro” due to the potentially hefty 63% erosion in shareholders’ funds if Astro is unsuccessful in its appeal in the case, Kenanga Investment Bank cautioned, keeping its ‘underperform’ rating.
Astro reported a net profit of RM47 million in 3QFY2025, marking its fourth consecutive quarter in the black, though it was largely due to lower net financing costs from favourable unrealised foreign exchange gains on unhedged lease liabilities, and lower intangible asset amortisation.
Quarterly revenue slipped nearly 10% year-on-year to RM749.70 million, primarily due to lower subscription revenue and advertising revenue.