ASTRO: Underperformance on Subscription Revenue Prompts Cautious Outlook

A leading media company recently reported financial results for its second quarter of fiscal year 2026 (2QFY26) that fell significantly short of both analyst and consensus expectations. The underperformance was largely attributable to struggles in its core pay-TV business and softer-than-expected contributions from newly launched television packages.

Performance Review

For 2QFY26, the company’s core net profit reached RM3 million, missing TA Securities’ estimate of RM6 million and falling below consensus forecasts, representing only 8.7% and 11.8% of full-year projections, respectively. Revenue experienced a notable year-on-year decline of 13.2%, settling at RM683 million. This downturn was primarily driven by a 10.7% year-on-year decrease in Pay-TV subscription revenue and a 12.9% year-on-year reduction in advertising expenditure (adex).

These declines occurred amidst prevailing macroeconomic headwinds and subdued business and consumer sentiment. Quarter-on-quarter, revenue also saw a 2.8% reduction from RM703 million. Consequently, core net profit decreased sharply from RM13 million in the preceding quarter to RM3 million. Despite these challenges, the core net profit was somewhat offset by lower content costs, which decreased by 11.6% year-on-year, and lower tax expenses.

Future Outlook and Challenges

The company’s “Astro One” pay-TV revamp strategy has not delivered the anticipated uplift in subscriptions. Instead, the initiative has inadvertently led to cannibalisation, with customers migrating to more affordable tiers, resulting in subscriber attrition and dilution of Average Revenue Per User (ARPU), subsequently contributing to the overall revenue decline. While management expects ARPU to stabilise, the continued lack of improvement in the subscriber base suggests a cautious outlook until clearer signs of recovery emerge.

Furthermore, persistent macroeconomic headwinds and subdued consumer sentiment are expected to continue constraining growth prospects and impede the pace of the company’s ongoing transformation initiatives. Management has reiterated its commitment to a comprehensive transformation agenda focused on driving sustainable long-term growth. Key pillars include strengthening local content offerings, expanding adjacent businesses such as freemium streaming (sooka), Astro Fibre, enterprise solutions, and addressable advertising, as well as streamlining legacy cost structures.

Analyst’s View and Recommendation

In light of the weaker performance and revised outlook, TA Securities has substantially lowered its earnings forecasts for FY26, FY27, and FY28 by -43.0%, -72.9%, and -75.4% respectively, mainly due to downward revisions in Pay-TV subscription revenue. As a result, the investment bank has downgraded its recommendation to HOLD and revised its target price downward to RM0.145 per share from the previous RM0.20 per share. This revised target price is based on a Weighted Average Cost of Capital (WACC) of 10.4%, a long-term growth rate of 0.5%, and incorporates a 3% ESG premium.

A potential re-rating catalyst for the stock would be contingent on the “Astro One” strategy gaining meaningful traction and successfully delivering consistent subscription growth.