Tuesday, July 21, 2009

What's Up Astro?

Blast from the past.

6th August 2007.

  • 06-08-2007: Credit Suisse maintains ‘outperform’ on Astro
    by Gan Yen Kuan

    KUALA LUMPUR:
    Credit Suisse has maintained its “outperform” rating on Astro All Asia Networks plc despite market concerns over losses from its Indonesian and Indian subsidiaries, citing Astro’s still-intact Malaysian cash flows.

    Investor concern over the losses is apparent as Astro’s share price has tumbled to its lowest since its IPO in October 2003.
    On July 26, the stock fell below its institutional IPO price of RM4.06. It closed at RM3.82 last Friday.

    In a report dated Aug 1, Credit Suisse said Astro was a major laggard, having tumbled 30% year-to-date despite an increasing market.
    It said Astro’s foreign shareholdings were down to 12%, the lowest since the IPO. Foreign shareholding reached 22% in 2004.

    Following a meeting with Astro’s management, Credit Suisse said they had stressed the attractive long-term growth potential of the two overseas markets.

    It said the management was committed to its progressive dividend policy and had stated that the payout rate would be around 50% of its Malaysian earnings.

    “The Malaysian pay TV unit has two million subscribers and continues to generate a strong cash flow. We are projecting RM700 to RM850 million of free cash flow for FY09-FY10,” it said.

    Credit Suisse said its discounted cash flow (DCF) target price of RM7.10 assumed continued growth in Malaysia, Indonesia turning profitable after five years and losses of RM600 million from India with zero profit contribution.

    In a worst-case scenario, its DCF valuation could fall to RM5.60, assuming continued growth in Malaysia and continuing losses in India and Indonesia for five years.

    “Excluding Indonesia and India, the Malaysian business is trading on FY2009 and FY2010 of 19 times and 14 times respectively.

    “We would be looking for entry points after 2Q results in September (which could stay weak), as the full benefits of the recent price hike will likely only kick in thereafter,” it said.
    Meanwhile, Macquarie Research said Astro was likely to institute more frequent price adjustments going forward as opposed to the current practice of a RM5 to RM10 increase every two to three years.

    “This should provide greater stability to domestic margins and greater earnings visibility,” it said in a research note dated Aug 2.

    “While we share management’s long-term vision for Astro, we believe that mounting losses from the ramp-up in India and Indonesia are likely to cap share price performance in the shorter term,” it said. ( Source:
    http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_39a1e7f7-cb73c03a-d647d800-9661a1b4. - link could be broken due to revamp on Edge's website. )

A RM7.10 price target for Asro back in 2007? LOL! It was one of them articles that bemused me.

Here's a report posted on eBursa from S&P Research, a couple of weeks later.
  • Astro All Asia Networks Plc

    Recommendation: BUY

    ASTR MK Price: MYR3.38 12-Month Target Price: MYR4.00 Date: August 20, 2007

    Analyst: Alexander Chia, ACA

    Results Review & Earnings Outlook

    • Astro’s 1QFY08 (Jan.) results were below our expectations for the 2nd consecutive quarter. While revenue was broadly within expectations reaching 22% of our previous FY08 forecast, net profit disappointed reaching just MYR32 mln (13.5% of previous forecast). The lowerthan- expected profit was attributed to higher-than-expected losses from its Indonesian venture as well as rising content costs.

    • Revenue for the quarter of MYR583 mln was flat QoQ but rose 11% YoY mainly as a result of higher subscription revenue from its multichannel TV business (MCTV). MCTV subscribers rose by 73,000 during the quarter to reach 2.27 mln while residential subscriber average revenue per user (ARPU) was steady at MYR77. Radio and library licensing revenues were 11% and 39% lower QoQ as a result of lower advertising revenue and lower licensing revenues from Shaw titles, respectively. Astro’s share of losses from its 20%-owned Indonesian JV reached MYR40 mln for the quarter which was higherthan- expected

    • While we expect the impact of the pay TV subscription price increase to kick-in during subsequent quarters, we have revised our net profit forecasts for FY08 and FY09 lower by 33% and 30% to MYR158 mln and MYR224 mln, respectively, to reflect increased programming costs and higher Indonesian JV losses as well as the recently proposed Pay TV JV in India that is expected to require five to six years to break-even. Management has guided for Astro’s share of the India JV loss to reach nearly MYR600 mln over a five-year period.

    Recommendation & Investment Risks

    We are upgrading our recommendation to Buy (from Hold) as a result of the recent price correction, but lower our 12-month target price to MYR4.00 (from MYR5.20) after imputing our new forecasts and updating our valuation parameters.

    • Our target price is based on a Discounted Cash Flow (DCF) valuation [key assumptions: WACC range of 10.5%-12% (unchanged), explicit cash flows for years 1-5, cash flow CAGR of 12.5% in years 6-10, and terminal growth of 3.5% (unchanged)] for its Malaysian operations.

    Although long-term prospects for its businesses in Indonesia and India are good, we have not attributed any value to these two ventures given the uncertainties involved and the long lead time required to reach break-even. After including the forecast FY08 net dividend of MYR0.055 (unchanged) we derive our MYR4.00 target price.

    • Management does not expect their overseas investments to affect Astro’s ability to continue paying dividends.

    • Risks to our recommendation and target price include potential increases in churn, higher-than-expected content costs and higherthan- expected losses from Astro’s investments in Indonesia and India.



One of features I like about S&P reports is that they have this thing called RECOMMENDATION AND PRICE TARGET HISTORY (OSK Research really needs to have this feature! ).

Yup, Astro All Asia has fared rather poorly since it's IPO. Pity them long term IPO investors. They had recognise the monopoly nature of Astro All Asia's business economics in Malaysia but alas, they did not expect Astro All Asia to make them poor business ventures into Indonesia and India.


Today Astro studying revamp proposals

Revamp or restructure are both such nice words to use in the business world. Some would just use 'correction of past mistakes' to be more precise.

  • Tuesday July 21, 2009
    Astro studying revamp proposals
    By B.K. SIDHU and LEONG HUNG YEE

    The exercise may include separation of overseas operations

    KUALA LUMPUR: Astro All Asia Networks plc is considering various proposals to restructure the company in efforts to put in place an efficient capital and corporate structure. The exercise may include a separation of its overseas operations, as well as a possible one-time special dividend payoff.

    At a press conference after the company’s AGM yesterday, deputy chairman and group CEO Ralph Marshall said the board had not decided on any of the proposals that its bankers had put forth and that no timeframe had been set for any possible restructuring.

    Over the weekend, several media reports speculated Astro was considering a plan to divest its unprofitable international operations in a deal valued at about RM9bil.
Several media reports??????


Or was it just the Edge Weekly?

LOL!


I guess it was another of them 'based on sources' reporting. :D




  • The reports said Astro’s two main shareholders, privately-held Usaha Tegas Sdn Bhd and Khazanah Nasional Bhd, would buy the company’s unprofitable international operations in a deal which might see Astro paying a one-off dividend of RM1 per share.

    The reports also suggested Astro would sell its Indian operations.

    Marshall dismissed the reports as “pure speculation,” saying “it may include the separation of the international operations from the Malaysian operations but we do not know yet as the advisers are evaluating all the proposals.’’
LOL!!!!!


Typical.

Pure speculation!! :D



  • “Astro is under-leveraged and this gives us a great opportunity to establish a very robust capital structure for the future,’’ he said.

    Astro shares reacted to the reports with the price rising to a 14-month high of RM3.68 when the counter resumed trading after a short suspension yesterday morning. The shares then succumbed to selling pressure in late afternoon and closed 20 sen lower on a volume of 11.7 million shares, making it the third biggest loser for the day.

    Astro had bought over 20% of India’s Sun Direct TV (which offers 170 channels nationwide) two years ago and also owns and operates 23 FM radio stations in India.

    In China, Astro has a marketing service company and Hong Kong Celestial Pictures which owns the Shaw Brothers film library.

    In Indonesia, Astro is pursing all legal means to resolve issues arising from its venture there.

    “A separation seems plausible and makes business sense but there is no way the Indian operations will be sold out of Astro group as India offers huge growth potential,” a source said.
Wonder who this source is?


Growth potential?

Growth in terms of revenue or in terms of profit?


Last I know, Astro just announced its first quarterly profit after 5 consecutive quarters of HUGE losses!







  • “If parked under Astro, the Indian operations may need to be financially supported in the next four to five years, so a separation lifts that burden,’’ the source added.

    Astro TV chief executive officer Rohana Rozhan said: “
    The Malaysian operations are clearly the cash-cow of the Astro group. Separating all the other overseas operations allows Astro to focus on its resources to grow and enhance returns from the Malaysian operations.’’

    Astro has been evaluating proposals for some time now and to create an efficient capital and corporate structure, it can de-list from Bursa Malaysia, stay the way it is and support its overseas expansion or separate the overseas operations in India, Hong Kong and China by hiving them off to another company.

    The major shareholders of Astro will own a stake in the company that will house the overseas operations.

    As a sweetener for any such deal to go through, the shareholders need to be rewarded and that is why a one-time special dividend may well be in the offing.

    T. Ananda Krishnan, via Usaha Tegas, may be repeating what he did for Maxis Communications Bhd where he de-listed Maxis to allow it to take on more debts to grow its Indian operations.

    For Astro, it may or may not be de-listed, but the entry of new partners for the separate unit is not to be discounted so that it can fund its future expansion.
Astro delisted? Ouch! Astro IPO investors since 2003 would NOT be happy at all!


And thanks to such news report, Astro is now trading much lower since Friday!



1 comments:

Richard Cranium said...

It is called a "pump-and-dump". And this time, I was the "fool" left holding the bag.

Serves me right.