KUALA LUMPUR: The current softer domestic economic outlook is expected to dampen consumers' and advertisers' sentiments, which could negatively impact demand for Astro Malaysia Holdings Bhd's products.
According to Hong Leong Investment Bank Bhd (HLIB Research), Astro has done much to turn the company around, acquiring many excellent streaming platforms, launching Astro Fibre, and addressable advertising.
The bank-backed research firm further said that Astro, despite recording an improvement in the number of subscribers as well as an improvement in average revenue per user (ARPU) due to the FIFA World Cup, was mitigated mainly by the increase in content costs, which caused the company to record a core net loss for the quarter.
"The company has done great initiatives to pivot away from being a legacy pay TV operator, on top of producing great local content.
"Nonetheless, we are becoming cautious if the company can attract demand quickly enough for its products, given rising inflationary pressures.
"Moreover, advertiser sentiment is also becoming subdued amidst the uncertain global economic environment. For these reasons, we opine that it might take a while before Astro could see any meaningful improvement in its subsequent earnings," HLIB Research said in a report.
On earnings, Astro's fourth quarter (Q4) FY23 core loss after tax and minority interest (LATAMI) of RM20 million rounded up its financial year 2023 core earnings to RM306.4 million, which accounted for a decrease of 36.7 per cent year-on-year (YoY).
The reported figures are lower than its previous quarters, posting RM95.3 million for the third quarter (Q3) FY23 and RM129.7 million for Q4 FY22.
The firm stated Astro's core LATAMI arrived below its consensus full-year forecast at 71.4 per cent or 77.4 per cent.
For quarter-on-quarter (QoQ), Astro's revenue increased by 7.0 per cent from the contribution of all three segments, such as television which showed an increase of 7.5 per cent, radio increased by 1.9 per cent and home shopping, that increased by 1.5 per cent.
However, its revenue YoY plunged by 3.9 per cent and a decrease of 9.0 per cent year-to-date (YTD) based on the decline in the television segment of 1.3 per cent year YoY and 5.7 per cent in YTD as well as home shopping which was reduced by 38.1 per cent YoY and 51.9 per cent in YTD.
However, the radio segment's gain, which declined by 5.7 per cent YoY and increased by 16.7 per cent YTD, has partially offset the decline.
"Given the results shortfall, we cut our FY24 and FY25 forecasts by 19.5 per cent and 14.7 per cent, respectively," it said.
The firm also downgraded Astro to 'Hold' from 'Buy' with a target price of RM0.59 from RM0.95.