KUALA LUMPUR (March 22): Pay-television operator Astro Malaysia Holdings Bhd risks further decline in earnings, amid revenue pressure and escalating costs, analysts cautioned following the release of its latest financial results.

Astro reported on Thursday a net profit of RM36.88 million — its lowest since the group's listing in 2012 — for the 12 months ended Jan 31, 2024 (FY2024). Still, the results came in above consensus estimates when accounting losses were excluded, partly helping the stock to buck a weak market.

Moving ahead, however, average revenue per user may come under pressure, due to the introduction of new plans with lower pricing floors, Kenanga Investment Bank said. The house maintained its 'underperform' call on Astro, equivalent to 'sell'.

It also cut its earnings forecast for FY2025 by 5%, and now forecasts the company to make a lower core net profit of RM193.9 million versus RM215.3 million in FY2024. 

At the 12.30pm midday break on Friday, shares in Astro were up one sen or 3.39% at 30.5 sen, valuing the company at RM1.59 billion. In contrast, the country's benchmark index FBM KLCI was slightly lower. 

Astro has fallen nearly 23% so far this year, continuing the downward spiral after losing more than half of its market value since 2021, as the company battled cord-cutting amid competition from internet streaming services such as Netflix.

Analysts also remained cautious, with six out of 13 telling investors to sell the stock, while another six has a ‘hold’ rating, and only one recommended a ‘buy’ call, according to Bloomberg. The 12-month target prices range from 27 sen to 86 sen.

Astro's earnings would continue to be impacted by declining TV subscriptions and advertising revenue, despite entering a seasonally stronger second-half period for advertising expenditure, Hong Leong Investment Bank said.

"Consumers may remain cautious about discretionary spending, due to elevated cost of living pressures, and the recent increase in the sales and service tax [to 8% from 6%]," the research house said.

Further, Astro’s margins will face further content cost pressures from expensive major sporting events, such as the Paris Olympic Games and Euro Cup this year, AmInvestment Bank. The research house kept its 'sell' call on Astro.

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