Battered Astro finally gets a ‘buy’ call

 

Astro’s FY2024 net profit plunged 86% to RM36.88 million from RM259.04 million a year ago, the lowest since its listing in 2012. (File pic)

PETALING JAYA: Astro Malaysia Holdings Bhd, which has experienced a torrid time in the past year with its shares plummeting and subscriber base fast diminishing, finally has something to smile about after CGS International issued a “buy” call on the counter.

It is the only one of 12 research houses with a “buy” call on the pay-television operator, according to Bloomberg data. Of this, six research houses had “sell” recommendations while five have a “hold” rating.

For the financial year ended Jan 31, 2024 (FY2024), Astro’s net profit plummeted 85.76% to RM36.88 million, the lowest since its listing in 2012 from RM259.04 million a year ago.

The dismal results were due to rising content cost with the strengthening US dollar, falling revenue with lower subscriptions, advertising, programming rights sales, and closure of its Go Shop operations. The company also laid off 20% of its staff as part of a major effort to cut costs.

Apart from higher broadband costs, its profit margin was also hit by staff-related costs as a result of a voluntary separation scheme (VSS) and higher net finance costs due to unrealised forex losses from unhedged lease liabilities.

Stripping out the unrealised forex impact and post-tax VSS cost, the group recorded a full-year net profit of RM181 million.

Cost-cutting bearing fruit

CGS said the slew of cost-cutting measures appear to be starting to bear fruit, given that the margin on earnings before interest, tax, depreciation and amortisation (Ebitda) had widened 123 basis points to 37.2% in FY2024.

It is also projecting that Astro’s free cash flow could rebound to between RM350 million and RM400 million in the 12-month ending January 2026 (FY2026) and FY2027, from below RM300 million in FY2025.

It added the strong free cash flows provide room for reinstatement of dividends. Astro declared a dividend per share of just 0.25 sen for FY2024, which translated into a 6% payout. This was a 91.7% drop from the 3 sen per share declared in FY2023.

CGS, formerly known as CGS-CIMB Securities, said that dividend payouts could rise to 20% by January 2025 as the group completes its cost-cutting initiatives. It added that dividend payout could rebound further to 50% by FY2026 and FY2027 on annual cost savings.

Its share price has fallen by 53% over the past year as its subscribers ditched Astro in droves in favour of illegal TV boxes, and competition from internet-streaming services such as Netflix.

“The acute share price weakness is warranted,” said CGS who now sees Astro’s shares trading at a “deep discount”. The research house now has a target price of 49 sen.

Astro shares ended up 1.5 sen or 4.8% at 32.5 sen, valuing the group at RM1.7 billion. - FMT