PETALING JAYA: Despite the challenging operating environment, Astro Malaysia Holdings Bhd is expected to see its growth driven by newly launched streaming service, called Sooka, and content.

       Contributions from these new services are expected to lift the pay-TV company’s revenue for the financial year ending Jan 31, 2022 (FY22).

       Astro’s net profit almost doubled to RM141.25mil for the first quarter of FY22 from RM73.84mil in the previous corresponding period.

       This was mainly due to lower content costs and impairment of receivables, offset by higher merchandise costs, marketing and distribution costs and licence, copyright and royalty fees as a percentage of revenue.

       For the quarter in review, the group’s revenue inched up 0.8% year-on-year to RM1.06bil, attributable to the increased advertising revenue, merchandise sales and others.

       Overall, Astro’s results were largely in line with expectations.

       UOB Kay Hian Research (UOBKH) noted that despite the nationwide lockdown, installation works for Astro’s service are still permitted as it is categorised as essential.

       “However, we expect potential higher TV subscribers churn and weakness in adex (advertising expenses) amid soft business sentiment.

       “Importantly, shrinking customer wallets due to the lockdown will have a longer-term impact in terms of the ability to drive Arpu (average revenue per user) uplifts naturally, ” the brokerage said.

       “This will be offset by growing momentum from Go Shop with the prevalence of online purchases during the lockdown, ” it added.

       UOBKH raised its FY22-FY24 earnings forecasts for Astro by 3%-5% to pencil in revenue contribution from the subscription of the Disney+ Hotstar from June 2021. This, it said, would be offset by lower adex revenue amid the lockdown.

       It raised its target price for Astro’s shares to RM1.20 from RM1.15 previously. However, it downgraded its recommendation to “hold” on the counter.

       TA Research said Astro’s management remained cautious due to the ongoing Covid-19 pandemic, which would continue to challenge enterprise and adex revenue.

       “The group remains focused on its transformation journey in its efforts to defend and drive key revenue streams. Key initiatives include enhancing its content proposition.

       “On top of its niche vernacular content, Astro aims to be Malaysia’s leading aggregator of the best streaming services, ” the brokerage said.

       Thus far, progress had been observed with Astro’s recent addition of Disney+ Hotstar for movie pack subscribers, while it also just launched Sooka, which targets the millennials.

       “While still in their early days, management is encouraged by the acceptance and response to the new additions, ” TA Research noted.

       It has maintained “buy” on Astro with a higher target price of RM1.35, compared with RM1.13 previously.