KUALA LUMPUR (June 19): Shares in Astro Holdings Bhd fell as much as 6.12% or six sen to 92 sen, following ratings downgrades after the Pay-TV group posted lacklustre first quarter ended April 30, 2020 (1QFY21) financial results.
According to Bloomberg, at least three analysts have downgraded their call recommendation on the stock.
MIDF Research’s Zhen Ye Khoo and Credit Suisse’s Amanda Foo have downgraded their recommendation on Astro to “neutral” from “buy” previously, while Kenanga’s Clement Chua has downgraded the stock to “underperform” from “market perform”, and lowered his target price from 90 sen to 83 sen — the lowest among all.
Elsewhere, there are currently nine “buys”, three “holds” and one “sell” on Astro, and the average target price given is RM1.13.
In a research note published today, Chua said he is sceptical if a rebound in economic activity could translate positively to Astro as quickly as customers may not immediately revert to their past content consumption habits.
“While we do not believe subscriber losses would occur in droves, the group may struggle with upselling its products and may see a higher take-up of freemium offerings, potentially further diluting its monthly ARPU (average revenue per user),” he said.
Additionally, Chua believes that earnings recovery could only be seen beyond FY23/CY22 as the return of global sporting events might reignite the highly seasonal content costs typically experienced by the group.
He also said although the stock may continue to provide solid dividend yields of around 6%, the challenges in operating in a spending-tight landscape may weigh further onto Astro's earnings for the year.
And hence, he holds an “underperform” call on Astro with a lowered target price of 83 sen, which is arrived from an unchanged valuation of nine times price-earnings ratio (1.5 standard deviation below the stock’s three-year mean) on FY22 estimated earnings.
To recap, the pay-TV operator’s net profit more than halved to RM73.84 million in 1QFY21, from RM176.20 million a year ago, while its revenue fell 14.6% to RM1.05 billion from RM1.23 billion, as it saw a 38% decline in advertising expenditure (adex).