Malaysian media major Astro continues to retain robust fundamentals, despite a broad macro downturn.
The company is guiding for 6-7% revenue growth for its FYE Jan. 2017 period, driven largely by the growth of its value-added services, including expanded on-demand platforms as well as home shopping and its Njoi freeview-type service.
Pay-TV subscriber growth, meanwhile, is dampened by Malaysia’s weak economy and poor consumer sentiment. Astro is guiding for about 35,000 net adds during FYE Jan. 2016, and an even flatter 2017.
One concern is spin down from key tiers, especially sports. EPL football renewal will likely only be finalized in Q1 2016.
Still, Astro's Arpu remains robust, reaching RM99.3 (US$27.4) per month in Q3 (its October quarter period), supported by value-added services (including new on-demand offerings) as well as additional content packs.
Astro customers are spending close to three hours a week watching its on-demand services.
The company is guiding for RM99.5 monthly Arpu in FY 2016, and RM101 in FY 2017.
In Q3, Astro added 14,000 pay customers and 55,000 Njoi subs, for customer bases of 3.53 million and 1.16 million respectively. This implies a total aggregate TV household penetration of 66%, with pay nearing 60%.
Profitability and shopping
Astro continues to manage content costs relatively well, despite strong foreign exchange pressures.
Nonetheless, content costs will likely exceed 35% as a proportion of revenues over the next one to two years, reaching RM1.7 billion (US$470 million) this fiscal, and RM1.95-2.0 billion in FYE Jan. 2017.
Net profit is likely to trend at around RM500 million, over the next two years, impacted by the macro environment, while Ebitda margins will trend at around 32%. Dividend payouts will remain healthy.
Astro’s home shopping arm (Go Shop) continues to grow, generating RM52 million in sales in Q3 versus RM37 million in Q2. The business is on track for a 35% profit margin in the long term.