KUALA LUMPUR, Dec 15 ― Public Investment Bank Bhd maintained its "neutral” stance on Astro Malaysia Holdings Bhd (Astro) despite it reporting a RM41 million net loss for the third quarter of financial year 2024 (3Q FY2024), after excluding contribution from Astro GS Shop Sdn Bhd, its home-shopping business.

Astro GS Shop ceased to operate effective Oct 11, 2023, the research house said.

Its 3Q FY2024 core net profit stood at RM42 million after stripping out unrealised forex loss and non-operating cost related to its voluntary separation scheme (VSS), which translates to a 42.4 per cent drop year-on-year (y-o-y).

"For the nine-month cumulative period (9M 2024), results were below our and market expectations, accounting for only 53 per cent and 58 per cent of full-year forecast, respectively, due to higher-than-expected operating cost, although revenue was broadly within our estimates,” the research house said.

It cut FY2024 to 2026 earning forecasts by an average 25 per cent to factor in higher content cost and other operating costs, PIVB said.

Consequently, the research house also revised down its target price (TP) to 43 sen.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) downgraded its stance on Astro from "hold” to "sell’” with a lower TP of 31 sen from 50 sen previously on the dissapointing results amid a shortfall which due to lower than expected revenue coupled with margin shrinkage.

It said Astro has done much to turn the group around, acquiring many excellent streaming platforms, launching Astro Fibre and addressing advertising.

"However, the continued soft economic outlook coupled with the intense competition from more affordable over-the-top (OTT) offerings such as Netflix, Disney+, HBO Max could continue to hamper demand for the group’s products,” it said.

Kenanga Research also downgraded Astro’s call from "market perform” to "underperform” and lowered its TP to 33 sen from 56 sen previously.

The research house said Astro’s 9M 2024 results missed expectations due to prevailing drag from subscriber churn.

Kenanga Research said there is no end in sight for subscriber base erosion.

It noted that Astro’s 9M 2024 topline contracted by five per cent due to sustained customer attrition which amounted to 136,000 year-to-date, leading to subscriber base erosion.

"To a smaller extent, the decrease in revenue was exacerbated by lower radio advertising expenditure (radex) due to weaknesses within the broader industry, and lower box-office receipts due to reduced footfall at nationwide malls in 3Q 2024.

"The larger dip in its bottomline of 58 per cent was attributed to higher overheads and chunky costs of RM52 million for its VSS severance payments and benefits under undertaken in August,” Kenanga pointed.

Excluding the one-off VSS cost, earnings before interest, taxes, depreciation, and amortization (EBITDA) margin shrunk to 41 per cent as the group grappled with legacy costs such as its transponder lease payment to MEASAT Satellite Systems Sdn Bhd.

However, on a brighter note, Kenanga said its average revenue per user (ARPU) continues to surge.

"Pay TV ARPU sustained its sequential uptick to reach a high of RM99.8 (2Q 2024: RM99.1, 3Q 2024: RM97.4).

"This follows a higher take-up rate for its bundled fiber offerings, as evident from the 22 per cent y-o-y expansion in its broadband subscriber base,” it added. ― Bernama