Astro: Top-line and bottom-line improved

Results Update

For QE31/7/2014, Astro's net profit increased by 7% q-o-q or 39% y-o-y to RM138 million while revenue increased by 8% y-o-y or 14% y-o-y to RM1.35 billion.

The increased revenue q-o-q due to an increase in subscription, advertising and other revenue RM29.9 million, RM45.2 million and RM20.1 million respectively. Net profit increased q-o-q due to an increase in EBITDA of RM21.0 million and lower depreciation of set-top boxes of RM4.5 million. The increase was partially offset by higher tax expenses of RM20.3 million.


Table: Astro's last 8 quarterly results


Chart 1: Astro's last 12 quarterly results

Valuation

Astro (closed at RM3.38 last Friday) is now trading at a trailing PE of 35 times (based on last 4 quarters' EPS of 9.6 sen). At this PE, Astro is over-valued. This high valuation cannot be justified by its tepid growth as reflected by PE/G ratio of 1.8 times.

Technical Outlook

Ashas broken below its intermediate uptrend line, S1-S1 at RM3.40 in June. Nevertheless, it is still in a long-term uptrend line, SS with the support at RM3.05-3.10.


Chart 2: Astro's daily chart as at Sep 19, 2014 (Source: Tradesignum)

Conclusion

Astro is a good stock for long-term investment. Due to high valuation, Astro is to be avoided. Its current rating as SELL INTO STRENGTH is wishful thinking. However, if it drops to RM3.10, it could be a good trading buy.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Astro.