KUALA LUMPUR: Analysts have cut Astro Malaysia Holdings Bhd's earnings forecasts for financial year 2025, 2026 and 2027 (FY25-27) and the stock's target price following a dismal third quarter.
Normalised net profit came in below market estimates for the quarter and the nine month period ended October 31, 2024 at RM1 milion and RM52 million respectively, according to Hong Leong Investment Bank Bhd research (HLIB Research).
Public Investment Bank Bhd Research (PublicInvest Research) attributed the drag on profits to lower-than-expected pay TV subscriber base, lower advertising revenue and higher operating cost.
PublicInvest cut FY25-27 earnings forecasts by an average of 30 per cent and brought down its target price for the stock to 20 sen.
HLIB Research cut its forecasts by an average of 40 per cent and lowered its stock target price to 20 sen.
PublicInvest Research said despite 2024 being a major sporting year, with events such as the Paris Olympics and UEFA EURO, advertising expenditure for Astro has not increased meaningfully. "We attribute this to the weak consumer sentiment as well as intense competition from the non-traditional digital platforms. In addition, competition from other video streaming services is expected to further erode Astro's market share in the pay TV segment," the firm said.
"While we believe content cost should ease in FY26F due to a more favourable exchange rate, topline growth is expected to be restricted by a challenging industry landscape," it added.
HLIB Research on the other hand believes its recent move to offer simplified package options from RM49.90 has resulted in lower average revenue per unit (ARPU).
ARPU fell to RM99.20 down 60 sen year-on-year, the firm said, reflecting the group's focus on growing customer volumes at the expense of revenue per user.
"Note that subscription revenue has been the main revenue driver for the group making up about 62 per cent-77 per cent of top-line for the past five financial years."
" Despite Astro's expertise in local content production, its outlook remains clouded by softening adex trends and weakening subscription revenue, suggesting that the transition to over-the-top (OTT) media will continue to pose hurdles," it added.