On 8^th March 2023, Astro share price rose 20.66% from 0.605 to 0.73. Astro has not received any confirmation on privatisation deal. Astro Malaysia Holdings Berhad (Astro) is Malaysia’s leading content and entertainment company, serving 5.6 million homes or 72% of Malaysian TV households, 8,000 enterprises, 17.5 million weekly radio listeners across FM and digital, 14.0 million digital monthly unique visitors and 3.2 million shoppers across its TV, radio, digital and commerce platforms. (Source: Astro Annual report 2022)

On average Astro revenue has declined 4 percent a year from 5.6billion in 2017 to 4.1billion in 2022. In conjunction with lower revenue, the net income has dropped from 616million to 460million on the same period, 5 percent a year.

The current pe ratio is 8.4 based on the 2022 annual report, and ev/ebitda is 4.2. In FY22 dividend was 6.75cent, FY21 8cent, FY20 7.5. Given that the company revenue and net income are decreasing from year to year, we can expect that the company will cut dividend as well. If we assume that the company is issuing 6cent dividend for this year, then dividend yield is 8 percent.

It is a high quality company given that the company ROE ranging from 116% and 38.27% for the last 6 years. The company is a cash generating machine, the free cash flow/revenue for the last 6 years ranging from 17% and 24%.

Although the company has high borrowings at 3.5billion based on the FY23 Q3 quarterly report, in about 3 years’ time, the company can repay the borrowings using cash flow from operations.  However, in the latest quarterly report, net profit decreased by RM142.1m or 42.3% to RM193.5m during the period. The decrease was mainly due to higher net financing costs arising largely from unrealised forex loss from unhedged finance lease liabilities. Finance cost increased from 27.1million to 141.7million.

Based on the above analysis, the company seems to be doing quite OKAY given that it is a leader in Malaysia, however, the downsides are higher financing cost and the revenue and net income are decreasing every year due to the change of industry. What is your opinion, do you think that based on the current price the company attractive?

Disclaimer: This information is intended for educational purposes only. It shall not be understood or construed as, financial advice. It is very important to do your own analysis before making any decision

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Regards,

Raymond Lim, CFA