Astro rallies on compensation news

  • Business
  • Wednesday, 08 Oct 2008

Petaling Jaya: Shares in pay-TV operator ASTRO All Asia Networks plc rallied to an intraday high of RM2.83 yesterday, before profit taking trimmed gains, and the stock closed up 12 sen or 4.5% at RM2.80.

Dealers said the catalyst was news that Astro was seeking about RM905mil in compensation from its Indonesian partners over a failed satellite television joint venture in Indonesia.

In a filing with Bursa Malaysia on Monday, Astro said it had filed a notice of arbitration at the Singapore International Arbitration Centre and named PT Direct Vision (PTDV), a unit of the Lippo group, as well as PT Ayunda Prima Mitra and PT First Media Tbk as respondents.

Analysts said investors were “glad” that Astro was exiting Indonesia as it would reduce the group’s overseas losses.

“We view the exit from Indonesia as positive move as it (Astro) has been facing many problems in Indonesia,” an analyst said.

To date, the group has incurred about RM590mil in losses and write-offs from its Indonesian operations.

Kenanga Research, in a report yesterday, said it believed there was no chance for both parties to reach an amicable solution as Astro was now resorting to legal options to resolve the dispute.

“A monetary compensation of RM905mil should be enough to compensate the RM845.2mil that Astro had invested in the Indonesian venture over a four-year period,” it said.

“However, we are cautious with the development as it will drag and be time-consuming which could prove costly in terms of resources, both financial and human.”

Analysts said the outlook for the company’s domestic operations remained solid, with average revenue per user expected to rise and a continued expansion of TV channels.

“The local operations are profitable and cash-generative. There is a consistent stream of cash flow generated each year from the Malaysian business,” an analyst said.

Astro had in September said it would terminate its support and services to PTDV after refusing to renew the trademark license agreement, which expired on Aug 31, but later gave PTDV an extension of three weeks to Oct 19.

 ASTRO :  [Stock Watch]  [News]

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