HLIB research downgrades Astro Holdings to "Sell" on weak demand

KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has downgraded its call on Astro Holdings Bhd  to a sell and cut its earnings forecast for financial year 2024 (FY24) by 45 per cent on continued weak demand for its products.

"Astro has done much to turn the group around, acquiring many excellent streaming platforms along with launching Astro Fibre as well as addressable advertising. However, the continued soft economic outlook coupled with the intense competition from more affordable over-the-top (OTT) offerings such as Netflix, Disney+, HBO Max, could continue to hamper demand for the group's products," it said in its note today.

It has also set a lower target price of 31 sen for the stock, from 50 sen previously.

Astro's 3QFY2024 core profit after taxation and minority interest (Patami) of RM11.8 million, and 9MFY24 sum of RM135.5 million only made up 50 per cent of HLIB research's full-year forecast and 55 percent of consensus full-year forecasts.

The shortfall was mainly due to lower-than expected revenues coupled with margin shrinkage.

Astro's earnings continued to be dragged by declining TV subscription and advertising revenue despite entering a seasonally stronger 2H advertising expenditure period.

Average revenue per user was up to RM99.80 on the back of the new TV packs and broadband bundles,  however the total number of subscribers have continued to decline 2.0 per cent year-over-year post sporting seasons.

"Looking ahead, consumers could continue to be cautious with their discretionary spending in view of elevated cost of living pressures," said HLIB.

The research firm said advertisers could also continue to be cautious on ad spend for the same reasons, on top of coming off a high base last year post economic reopening.

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