KUALA LUMPUR: Astro Malaysia Holdings Bhd (Astro) will likely need more time and marketing efforts to deliver its value proposition to targeted customers, said Hong Leong Investment Bank Bhd (HLIB Research).
Analyst Tan Kai Shuen said consumers may soon find Astro's one-stop entertainment solution appealing in anticipation of streaming service availabilities becoming more varied and crowded.
"Despite the economy reopening in phases since September, advertisement expenditure (adex) and commercial subscription improvements only came in towards the end of October, resulting in earnings disappointment," she said in a research report today.
Based on the management's guidance, she said the recovery momentum in adex and commercial subscription continued in November.
"So far in December, this should contribute positively towards the bottom line as these two segments are high-margin segments."
HLIB said the recovery in adex would be supported by the resumption of business activities, year-end festivities in December and Chinese New Year in January and the resumption of live shows and the return of new Astro vernacular contents to the TV as well as advertisers exhausting their marketing budget towards year-end.
For commercial subscriptions, she said enterprise customers were returning towards the end of the third quarter ended October 31, 2021.
"The number of customers was up 17 per cent quarter-on-quarter. The recovery in this segment should continue towards the next quarter as consumer activities (food and beverages and bars) and inter-state travelling (hotels) pick up."
HLIB has lowered its forecast for Astro by 4.7 per cent in the financial year ending January 31, 2022 (FY22).
"We maintain a Buy call with a slightly lower target price of RM1.40 from RM1.41 as a result of our earnings revision."
HLIB said Astro had been taking incremental steps to adapt to the changing consumer trends, including aggregating streaming services to capitalise on the shift in TV viewing preference from linear to on-demand.
This includes the introduction and deploying internet-connected plug-and-play set-top boxes which reduces installation costs for Astro while allowing for on-demand viewing and avoiding rain fade issues for customers.
On earnings, Astro's net profit increased 21.6 per cent year-on-year to RM105.9 million in Q3 from RM87.13 million, while revenue eased 7.3 per cent to RM1.02 billion from RM1.1 billion posted in the same preceding quarter.
This was contributed by lower net finance costs and tax expenses, it said in an exchange filing yesterday.