PETALING JAYA: It would be financially feasible should tycoon Tan Sri Ananda Krishnan, Khazanah Nasional Bhd, and bumiputra foundations decide to take Astro Malaysia Holdings Bhd private again, at a share price of up to RM2.
According to Maybank IB Research, it will only take two to three years of earnings before interest, taxes, depreciation, and amortisation (Ebitda) to recover the capital to take Astro private.
Ananda, Khazanah Nasional and bumiputra foundations collectively own 70.7% equity in Astro.
Ananda, Astro’s largest shareholder, bought 16.1 million Astro shares since June this year, thereby increasing his shareholding in Astro to 41.2%.
“While Bursa Malaysia filings did not reveal the price Ananda paid for them but a cursory check on the last price of Astro shares on the days he bought them revealed that most of the shares were bought at prices that were higher than the current price of Astro shares at only RM1.35.
“This means that investors who buy Astro shares today will be buying them at prices not a lot more expensive than when Ananda bought them recently,” said Maybank IB Research.
Astro’s share price fell by 19% since the group reported a record low core net profit for the second quarter financial year 2019.
“We believe that the market has been overly bearish as the underperformance was due to transiently high 2018 FIFA World Cup content cost which compressed Ebitda margin to only 20%.
“Although the currently weak US dollar to ringgit exchange rate will exert upward pressure on other content cost, we expect total content cost to moderate sharply post-2018 FIFA World Cup and Ebitda margins to reflate to 32% to 33%,” said Maybank IB Research.
The research house added that Astro is currently trading at only five times 12-month forward enterprise value (EV)/Ebitda or a whopping four standard deviation below its post-initial public offering (IPO) mean.
Additionally, Astro is trading below the global pay-TV average EV/Ebitda of 7.4 times for 2018 and 7.1 times for 2019.
“If earnings recover in FY20, which Astro and we believe it will, dividend per share (DPS) will also recover.
“Astro did not guide on FY20 total DPS but we opine that a return to 12.5 sen is reasonable as they imply more than 75% dividend payout ratio, its DPR policy.
“Even if Astro pays FY20 total DPS of 10.5 sen, it still implies a very high 7.8% dividend yield,” said Maybank IB Research.
Going forward, the research house expects TV subscription revenue’s year-on-year decline to continue narrowing as consumer sentiment gradually recovers.
Furthermore, Astro is planning to offer privileges to only pay-TV subscribers to entice Android TV box and NJOI viewers to be pay-TV subscribers themselves.
On the regulatory front, Astro is not at risk of being dismantled for being a monopoly and has not been asked to cut prices.
Astro closed 0.7% lower at RM1.34, traded on a volume of 2.36 million shares.
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