Astro’s 2QFY24 earnings drop as subscriber base continues to erode

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The missed expectations were largely due to Astro’s sustained TV subscriber churn and high content costs that weighed down on its bottom-line.

KUCHING (Oct 2): Astro Malaysia Holdings Bhd’s (Astro) second quarter of financial year 2023 (2QFY24) earnings continued on their downwards trend with its core net profit (CNP) coming in at RM47.8 million, translating to a plunge of 35.5 per cent quarter on quarter (q-o-q) and 54 per cent year on year (y-o-y).

Cumulatively, Astro’s first half of financial year 2023 (1HFY24) CNP fell by 45.3 per cent y-o-y to RM121.9 million, missing expectations as it only made up 39 per cent of consensus full-year earnings estimates.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the missed expectations were largely due to the group’s sustained TV subscriber churn and high content costs that weighed down on its bottom-line.

The group’s 1HFY24 topline had contracted by 6.5 per cent y-o-y to RM1.76 billion largely due to lower contribution from the group’s eroding TV subscriber base which sustained its quarterly decline with a net churn of 41,000 subscribers during the period under review.

Its bottom-line also fell at a larger rate at 45.3 per cent due to a spike in financing costs, content costs and higher depreciation.

“However, this decline in its bottom-line was partially cushioned by higher advertising expenditure (adex), narrower home-shopping losses, improved contribution from tis radio segment, and lower taxes,” the research arm pointed out.

Despite sustained erosion in its TV subscriber base, the group’s TV segment in 2QFY24 had seen a turnaround from its pre-tax losses recorded in the previously quarter due to an increase in adex.

The segment’s pay-TV average Revenue per User (ARPU) also expanded for the third consecutive quarter to RM99.1 and was largely support by a higher take-up of fibre packages and the churn of lower ARPU customers.

Despite the disappointing results, Kenanga Research guides that they believe Astro’s earnest initiatives to defend its Pay-TV subscriber base, attract adex and diversify its earnings via acquisition of adjacent businesses will soon turn the tide for its earnings growth.

They note that significant measures Astro has undertaken include the introduction of addressable advertising, venture into fibre broadband, technology upgrades to enhance its set top boxes, launch for its cooka streaming service, and new aggregated content offerings such as Netflix and Disney Hotstar.

The group has also reiterated its focus on production of local content through the recent acquisition of post-production studio, Basecamp Films, which is expected to further enhance the group’s internal capabilities in production of local content.

According to Kenanga Research, local content yields the highest return on investment (ROIs) as well as contributing to 77 per cent of total watch time.

And on the cost cutting front, group has also announced that they will be embarking on its voluntary separation scheme that is expected to be finalised in 3QFY24 and save circa RM53 million per annum.