The Downtrend of Astro's Shares: Time to Buy or a Signal to Retreat?
Astro reported earnings results last week, revealing a decline in net profit for the fiscal year ending January 31, 2024 (FY2024), which fell from RM 259 million in the previous fiscal year to RM 36.88 million. Revenue decreased by 8.4% YoY, from RM 3.62 billion to RM 3.34 billion. The contraction in earnings was primarily attributed to ongoing trends of TV subscriber churn and lower advertising expenditure (adex).
Although Astro's share price rose after the earnings release, the company has fallen 21.5% since the beginning of the year.
Earnings Highlights: Increases in ARPU and Adex
There were also some highlights in last year's performance. Last year, Astro rolled out new plans like Astro BizOne based on business size and type, and revamped Sooka's pricing structure for all VIP plans to encourage sampling. Five new FAST channels were added to Sooka and NJOI, expanding Sooka's FAST offerings to 15 channels.
Accompanied by some new actions, ASTRO saw positive developments in ARPU and adex. The company concluded the year with an increased ARPU of RM99.7 (up from RM98.20 in 4QFY23), driven by robust bundled fiber package sales. Moreover, there was a 10% quarter-on-quarter rebound in adex, fueled by the radio division, which benefited from an uptick in advertising during the Lunar New Year celebrations.
ASTRO is hopeful that its newly introduced plans, with a competitive entry-level pricing of RM40-RM60 per month, will capture a wider market share and expand the advertising market amid decreased disposable incomes in Malaysia. The company also maintains a positive outlook on its ARPU stability, thanks to its broadband bundle offerings. Furthermore, ASTRO is buoyed by Sooka's growing popularity, which is expected to significantly contribute to future earnings as consumer awareness increases.
However, analysts remain skeptical about this perspective.
Revenue Under Pressure: Intense Competition and Low-Cost Plans Impact Earnings
ASTRO's pay-TV operations are encountering challenges from several directions. For international content, it is up against fierce competition from over-the-top (OTT) streaming services such as Netflix and Disney+ Hotstar. In the realm of local language programming, it contends with national Free-to-Air television (FTA TV) for viewership. Additionally, the younger demographic is increasingly turning to social media, mobile applications, and websites to consume news and sports content.
Kenanga suggests that the new plans of lower floor pricing may have a positive impact on market share acquisition, but there is pressure on ARPUs.
Aminvestment has also pointed out that insufficient brand recognition and a narrow range of content on Astro's streaming platform, Sooka, are the primary factors preventing this segment from offsetting the downturn in traditional revenue streams.
Moreover, HLIB indicates that given the rising cost of living and the introduction of the Sales and Service Tax (SST), consumers are likely to remain cautious with their discretionary spending.
Cost Surge: Major Event Fees and Strong Dollar Boost Expenses
Astro profit margins will face further content cost pressures from expensive major sporting events, such as the Paris Olympics and this year's European Championship.
Moreover, the Swiss National Bank's recent rate cut, alongside expectations for earlier cuts by the ECB and the Bank of England compared to the Fed, and the low likelihood of the Bank of Japan raising rates, have contributed to a stronger dollar amid more favorable perceptions of the US economy. This stronger dollar may weaken the ringgit, increasing costs for businesses and potentially hurting Astro's profits.
Sources: The Edge, Bernama.com, Kenanga
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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mjbond : a business that sunset until night time. unless they change the business modal. soon midnight come
104412503 : Good analysis
Ryugentrades : At the moment, chart still shows clear downtrend, for any reversal, need to have strong news and fundamental catalyst with reversal of price trend. Cheap and get cheaper and too risky to buy into it now.
From a business model perspective, it’s a tough business unless major changes to their overall strategy. Relying on sports to attract and maintain subscribers is long gone. Kids no longer interested in their content, YouTube and newer platform is more appealing. Competition is strong with Netflix and Disney +. Social media platform has also made customers not used to paying such high price for subscription.
104850569 : how to compete with illegal tvbox?
104796575 : Don't waste time on Astro