Astro looks ahead, puts behind the ‘noise’ surrounding poor stock performance

  • Business
  • Monday, 10 Dec 2012

Rohana: ‘There is plenty of room for Astro to grow.’

PETALING JAYA: Fresh from announcing its third-quarter results, Astro Malaysia Holdings Bhd says it is ready to continue to push forward and put behind it the “noise” which had surrounded the stock's poor performance since its listing on Oct 19.

“I want to be very clear on this. Astro is not a new company.

“Taking it to the market, we took the best advice, understanding where we were going to take the firm from there on,” chief executive officer Datuk Rohana Rozhan said.

Rohana said the pay-TV operator's growth would hinge on three growth pillars, namely new subscribers, higher take-up of “value-add” services among its current subscribers which will cause its average revenue per user (arpu) to rise as well as an increase in advertising revenue.

“Malaysian households will grow from 6.7 million now to what we think will be 7.7 million in the next five years based on the research that we have obtained.

“Within that, Astro is at 50% so there is plenty of room for us to grow,” she told StarBiz.

Putting market criticisms surrounding Astro's share price performance post-IPO behind, Rohana said Astro would move forward to focus on generating total returns for its shareholders.

Astro's share price had never closed above its IPO price of RM3 since it was listed, falling to a low of RM2.59 last month amid talk that the IPO was priced too high.

Heavy selling of the shares also prompted a lot of speculation on who the sellers were.

“I won't talk about our shareholders, it is their prerogative to sell... In pricing the IPO deal, we took the best advice from the best bankers and analysts and as far as the company and promoters were concerned, our job was to be comfortable with the numbers and know that we can generate a total return for all shareholders,” she said.

It was reported that several top executives of Astro, led by Rohana, bought shares in the open market a few days after its listing in a move to shore up confidence.

“We bought the shares because we are believers of the company and because it is good value.

“Obviously, if we think it is good value at RM3, we would think it is good at below RM3,” she said.

According to filings with Bursa Malaysia, Rohana has a 0.07% stake in Astro.

Rohana said it was “quite upsetting” that some of Astro's employees who had taken loans to subscribe to Astro shares were faced with margin calls even as the stock traded below its IPO price.

“You want a work force to be motivated and be happy, so we stook a few steps, we spoke to the banks to provide indulgence (which will expire next month) but the reality is that this is no longer an issue. We re-focused the people and told them that we were in this together. Going forward, we will continue to create value.”

Astro, she said, would be on expansion mode over the next two years as it invests heavily to migrate its customers onto the Astro B.yond platform and to double its satellite capacity.

So far, 1.8 million of its total 3.2 million customers have migrated to the platform while it is on track to complete the entire migration by the end of January 2014.

The expansion would see a slight dip in earnings before interest, taxes, depreciation and amortisation margins in the current and next financial years, she said, after which the margins would go back to that of the one recorded in financial year ended Jan 31, 2012, which was 36.4%.

As far as competition is concerned, the Internet is by far its biggest competitor as individuals can download movies and songs for a fee or even for free.

“We are aware that our job is to get a fair share of the consumer's wallet and advertising, so we focus on customers. It is about differentiating ourselves from what is freely available out there,” she said.

One of Astro's biggest differentiating factors, according to her, is its high-definition (HD) channels viewed via the Astro B.yond set-top boxes .

An upgrade of existing subscribers to HD set-top boxes have the potential to lift Astro's arpu by more 20% due to take-up of HD content, according to a note by Bank of America Merrill Lynch.

Rohana said content costs, which remained a concern among analysts especially given that the company recently obtained the winning bid for the Barclays Premier League broadcast rights would be at the most 35% of revenue.

Astro shares finished last week at RM2.99 after touching an intra-day high of RM3, retracing most of its losses in the week ahead of the announcement of its third-quarter results.

Last Wednesday, it reported a net profit of RM118.1mil for its third quarter ended Oct 31, 14.1% higher than the net profit of RM103.5mil in the same period last year.

For the nine months ended Oct 31, Astro's customer base grew by 278,000 while arpu grew 6% to RM92 per user on the back of a higher take-up of its products and services

It declared a dividend of 1.5 sen per share.

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