KUALA LUMPUR (March 15): Maybank Investment Bank (Maybank IB) Research on Sunday (March 13) maintained its “buy” call on Astro Malaysia Holdings Bhd and revised up the media company’s target price to RM1.47 from RM1.38 after raising its long-term earnings to account for higher advertising expenditure (adex).

The research house’s analyst Yin Shao Yang said in a note that he raised Astro earnings for the financial year ended Jan 31, 2022 (FY22) by 16% to account for higher adex (TV and radio) and lower tax rate.

For Astro’s upcoming fourth quarter ended Jan 31, 2022 (4QFY22) results, he expects core net profit of RM121.6 million (+27%) and dividend per share (DPS) of 2.5 sen (+1sen quarter on quarter).

“Our read of Media Prima Bhd’s recent positive results indicates to us that we can expect not dissimilar results from Astro when it reports 4QFY1/22 results on March 31, 2022. We modify our FY22E/FY23E/FY24E earnings by +16%/- 6%/+15% and raise our DCF-based target price to RM1.47 from RM1.38. With >40% upside potential, we maintain our buy call on Astro. We continue to like Astro for its high dividend yields of >7% per annum and as a proxy to recovering consumer sentiment,” he noted.

Media Prima’s share price recently rallied as it delivered a 4QFY21 (fourth quarter ended Dec 31, 2021) core net profit which was the highest in six years and declared a 4QFY21 DPS which was the first in five years, he added.

“What piqued our interest is that Media Prima is often seen as a good barometer of consumer sentiment as it relies heavily on very volatile adex.

“We gathered that Media Prima’s positive results in 4QFY21 is an encouraging sign for Astro which has not been spared from hitherto poor consumer sentiment,” he said.

Yin’s interpretation of the Malaysian Institute of Economic Research Consumer Sentiment Index and data points provided by Nielsen Audience Measurement is that: (i) Astro’s 4QFY22 TV subscription revenue will ease quarter-on-quarter but moderately; (ii) Astro’s 4QFY22 TV adex will recover quarter-on-quarter; and (iii) Astro’s 4QFY22 radio adex will recover strongly quarter-on-quarter.

“While TV and radio adex accounts for about 10% of group revenue, they can be impactful earnings wise, thanks to high operating leverage,” he said.

Meanwhile, he trimmed Astro’s FY23 earnings by 6% but raised FY24 earnings by 15% as he brings forward higher content costs driven by the Qatar FIFA World Cup to FY23 from FY24.

“Consequently, we raise FY22 DPS by one sen, trim FY23 DPS by 0.5 sen and raise FY24 DPS by 1.0 sen,” he said.

At the time of writing on Tuesday (March 15), Astro was unchanged at RM1.01, valuing the company at RM5.27 billion.

Year-to-date, the counter has risen 6.32%.