Astro sees mid to high single-digit revenue growth in FY16

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KUALA LUMPUR: Astro Malaysia Holdings Bhd, the country's leading pay-TV operator, expects mid to high single-digit percentage growth in revenue for its financial year ending January 2016 (FY16), as it further expands its penetration rate to reach 85% by 2020 from 65% currently. To reach its goal, chief executive officer Datuk Rohana Rozhan said the group will focus on the provision of premium content. “Our key strategy is to focus on premium content and increase revenue growth by serving more households through a mixture of products,” she told a press conference after the company’s annual general meeting and extraordinary general meeting yesterday.

She said Astro will continue to expand its existing platforms such as its Go Shop shopping platform, which is expected to contribute RM150 million to revenue in FY16. “We are looking at RM150 million in terms of revenue by the end of the year. We are looking at margins of about 15% to 20% from Go Shop in terms of e-commerce. We expect the business to break even within the current financial year,” said Rohana. Astro also plans to expand its subscription-free NJOI satellite TV service, with the launch of NJOI On The Go within the next few months, allowing NJOI users to tune in via mobile platforms.

Meanwhile, Rohana said the volatile foreign exchange rate will impact Astro’s purchase of content, as approximately 60% of its content consists of international sports programmes which are denominated in US dollars.  “For every 10% depreciation of the ringgit or appreciation of the US dollar, it has an impact of RM35 million per year on our content costs,” she said, adding that the group spends about RM1.7 billion on content per year.

On capital expenditure (capex) for FY16, Astro has allocated about RM300 million, lower than its allocation of RM400 million in FY15 as the group has completed the bulk of its capex last year. “The major part of the capex will be on the new transponders. We have taken delivery of seven transponders recently and soon we are going to launch nine HD (high definition) and two SD (standard definition) channels,” said Rohana.

Despite posting commendable results for its first financial quarter ended April (1Q), shares in Astro fell as much as 11 sen or 3.7% in early trade yesterday, on concern over weaker results ahead. In a report yesterday, Maybank Investment Bank Bhd (Maybank IB) pointed out that Astro had lost 5,000 pay-TV subscribers quarter-on-quarter (q-o-q) in the first quarter, 24,000 HD subscribers and 8,000 Super Pack subscribers. 

"This culminated in 1QFY16 average revenue per user (Arpu) being flat q-o-q at RM99, the first time since relisting that Astro did not record Arpu growth," said Maybank IB. "As much as the decent 1QFY16 results reflect the operations of previous quarters, we fear the weak 1QFY16 operations may reflect weaker results ahead.”

For 1QFY16, Astro saw 31% growth in net profit to RM168.3 million, from RM128.3 million a year earlier, while revenue climbed 6% to RM1.33 billion from RM1.25 billion. Astro (fundamental: 1.1; valuation: 2.1) shares closed four sen or 1.3% lower at RM2.97 yesterday, bringing its market capitalisation to RM15.66 billion.

 

This article first appeared in The Edge Financial Daily, on June 18, 2015.