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Thursday, June 15, 2017

Astro: Earnings Weaker y-o-y

Results Update

For QE30/4/2017, Astro's net profit rose 35% q-o-q but dropped 3% y-o-y to RM196 million while revenue dropped 5% q-o-q or 3% y-o-y- at RM1.326 billion.

Revenue dropped y-o-y mainly due to a decrease in licensing, subscription and advertising revenue. The decrease in licensing revenue was due to loss of content recovery for sports channel. The decrease in subscription revenue was mainly due to lower package take-up. Lower advertising revenue in the current quarter owing to Chinese New Year advertisement spending recorded in the corresponding quarter.

Net profit decreased y-o-y due to increase in the proportion of content costs against revenue and increase in net finance costs, offset by lower depreciation of property, plant and equipment. Higher net finance cost was due to lower unrealised forex gain arising from unhedged non-current balance sheet liabilities comprising, finance lease liabilities and vendor financing.


Table: Astro's last 8 quarterly results

Astro's revenue seems to have broken its "uptrend". Can the profits "uptrend" sustain if revenue uptrend ceased? The break in the revenue uptrend is a concern, especially with the start of the Free Digital Broadcast under MYTV.


Graph: Astro's last 23 quarterly results

Valuation

Astro (closed at RM2.70 yesterday) is now trading at a trailing PE of 23 times (based on last 4 quarters' EPS of 11.86 sen). At this PER, Astro is fairly valued. However, Astro paid out dividend quarterly which amounted to 12.50 sen for the last 4 quarters; giving the stock a decent DY of  4.6%.

Technical Outlook

Astro is in a downtrend line, at RM2.80.Immediate support is from the horizontal line at RM2.50.


 Chart: Astro's weekly chart as at Jun 15, 2017_12.30pm (Source: ShareInvestor.com)

Conclusion

Despite its steady financial performance and fair valuation, Astro's rating remains a HOLD because it has not broken above its downtrend line.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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