Featured Report: MIB On Astro All Asia

I had voiced my concern on Astro increasing its stake in South Asia FM.

MIB (Maybank Investment Bank) had a report out and I was lucky to grab a hold of it. In it..

• South Asia FM is loss-making. It recorded a RM51.9m net loss RM51.9m in FY09 and although Astro is positive about its long term prospects, is not expected to break even for at least another two years. As it is now an associate, Astro could recognize its share of losses amounting to approximately RM10m p.a. (RM51.9m X 20%). We maintain our earnings estimates as the impact on earnings is not significant at <5%>

So how?

South Asia is making losses!

And Astro is pumping more money in it.

Incredible yo!

And needless to say MIB adds.

• Expensive at 3.4x book. We understand that only Astro has injected equity into South Asia FM only recently. The additional 13% stake acquired values the whole company at RM465.1m, equivalent to 3.4x its enlarged net book value (RM85m FY09 net book value + RM50m subscription proceeds).

Is Astro making any sense?

Increasing stake - paying more money and at an expensive price for a company that is losing quite a lot of money?

How la?

Does it's shareholders knows exactly what is happening? For I sure do not!