How Much Is Astro's Worth ?

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How Much Is Astro's Worth ?

kiasutrader

Publish date: Fri, 05 Oct 2012, 09:25 AM

Target Price: 3.53 (TA), 3.09 (ECM)

a. At rm3.00, It Is Fair '

b. Its Premium Is Justified '

a. At rm3.00 It Is Fair '

While industry observers said the new RM3 retail price for the comeback listing of Malaysia's largest pay-TV operator is 'fairer' compared to the indicative RM3.60 set for bumiputra investors, the investment community is still largely divided on the stock.

Despite Astro's historical price-to-earnings ratio (PER) shrinking slightly to 24 times based on the retail price and net earnings of RM629.6mil for the financial year (FY) ended Jan 31, 2012 some remained unconvinced and would not be subscribing for the shares.

The cornerstone investors have their own agenda. There could be other reasons. Maybe they think there is a possibility of someone coming in to buy them out later at a higher price or the funds who showed interest might be doing so for indexing purposes. This is especially true for funds who track the benchmark KL Composite Index. They are buying into Astro for that and not so much for the growth of the company.

Astro's management has guided for lower earnings and margins for FY13 and FY14 as the company converts the current (Sept 2012) batch decoders to high-definition, the cost of which is borne by Astro. This earnings erosion is, however, expected to recover by FY15.

Based on the listing price of rm3.00 per share, Astro is valued at rm15 billion. However some say its value could even higher at between rm15 billion and rm22 billion.

Astro has already achieved critical mass and its push into more value added products will boost its average revenue per user.

Astro currently (Sept 2012) dominates the local pay TV scene with over three million subscribers and is poised to continue adding subscribers at a healthy pace.

Post IPO, Astro's net debt to Ebitda ratio will be reduced to 2.2 times from 2.4 times and be maintained at 1.5 to 2 times in the long run.

Ananda, the country's second-richest man, took the satellite TV operator private in 2009 in a deal worth RM8.5bil. The company is being relisted at RM18.7bil without its Indian and Indonesian operations, or 125% higher than when it was delisted three years ago at RM4.30.

Astro has a longer-term growth story and shareholders will have to wait it out.

Margins were likely to see compression for the time being (Sept 2012& Beyond) as Astro worked to switch some 1.5 million of its subscribers to high-definition. However, Astro's management was confident it could bundle both TV as well as broadband offerings once the conversions were complete.

Its Premium Is JUSTIFIED '

For the financial years 2013-2014 (FY13-FY14) expect revenue to grow driven by growing average revenue per user (Arpu) and residential subscriber base, thanks to its premium packages and product bundling that includes its IPTV (Internet protocol TV) services. However, amid an accelerating depreciation to its Astro B.yond set up boxes, higher customer acquisition cost and a higher finance cost, expecting its earnings to contract by 21.8% in FY13, before recovering in FY14.

The group will also commit to pay out 75% of its earnings as dividends to shareholders from FY14 onwards.

On a price-to-earnings (PE) valuation basis, the issue price of RM3 translates to a PE of 32 times based on FY13 estimated earnings per share. However, on a longer-term basis the premium is justified due to Astro's: i) dominant position within the industry, ii) expected double digit bottom line growth, and iii) decent bottom line margin for the next five years at least.

Astro is primarily engaged in the creation, aggregation and distribution of content over multiple delivery platforms including TV, radio, publications and digital media in Malaysia. In terms of its business segment, the group is divided into four main segments: TV, radio, publication, and digital services. Of these segments, the TV and radio segments make up 94.3% and 4.4% of its total revenue (based on first quarter FY13 performance).

Astro is the largest pay TV operator in Malaysia and in South-East Asia by subscriber base with over 3.1 milliom residential pay TV subscribers to date. As at April 2012, the group had a market penetration rate of about 50% of Malaysian TV households which represents 99% market share of the Malaysian pay TV segment.

The group exclusively broadcasts some of its third-party international channels such as National Geographic Channel, Discovery Channel and AXN, to name a few. It also broadcasts a collection of international and regional sports content including, Barclays Premier League, UEFA Champions League, etc. Altogether the group broadcasts 156 channels, of which 68 are produced by Astro. Going forward, it expects its channel capacity to increase to 180 SD and 102 HD channels with the launch of Measat-3B. Its radio segment consist of 20 different stations, available via FM stations (nine stations only), DTH satellite TV, IPTV, mobile and Internet platforms.

Its listenership and radio advertising expenditure market share reached 52% and 53% as at April 2012. The group has the highest rated radio stations in the Malay, Chinese, Indian and English languages in terms of listenership.

The group's highly geared position of 6.6 times (pre-listing) is expected to lighten (after paring down RM500mil in debt and new issue of shares). Post-listing, Astro's gearing level would reduce to 1.8 times.

Discussions

Be the first to like this. Showing 3 of 3 comments

lotsofmoney

Wait for Apple TV, Goggle TV ( tabletop converter available now ) and WaiFi TV ( free of charge ) esp now that the whole of Penang has wifi coverage and not to mention Utorrent.

2012-10-05 13:31

hatifahs

20 sen boleh lah kot 1st day listing.

2012-10-05 18:28

100100100

hope more then 20 sen la.

2012-10-05 19:06

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