Astro (Opex Is Near Tail End)

Slim margins due to a high opex have been among key reasons for the lack of interests in its share price. But it will be different in 2014 for Astro’s heavy opex cycle is near its tail end.

As its opex shrinks, the group’s profit margins will grow. This means it can continue with its progressive dividend policy since it is very cash generative.

It is now (Dec 2013) 80% of its customers are already on the new platform. So it can much say the peak reinvestment year is over.

Astro’s net margins was affected because it was in the reinvestment stage over the past few years prior to Dec 2013. It incurred heavy opex and depreciation charges to upgrade subscribers’ set top boxes to high definition decoders which allows it to charge higher fees for premium services.

To entice subscribers to upgrade, Astro obsorbs all the costs for the Beyond decoder, satellite dish and installation charges at rm600 per decoder.

From FY2011 to FY2013, the total number of decoders swapped was 1.63 million, This could cost Astro more than rm900 million.

For 9MFY2014, Astro’s net profit came in marginally higher at rm336.56 million compared with rm334.84 million the previous corresponding period. Earnings stood at rm1.202 billion which was 15.49% higher that the previous year’s rm1.04 billion, indicating that opex had eaten into the group’s bottom line.

To date (Dec 2013), 80% of Astro’s 3.4 million subscribers have converted to Beyond decoders.
Observers expect Astro to post a higher net profit in FY2015 given lower opex from the STB swaps.