Report from The Star
PETALING JAYA: Malaysia’s biggest pay-TV firm Astro Malaysia Holdings Bhd has set its initial public offering (IPO) price at RM3 for the retail, institutional, cornerstone and bumiputra investors.
Astro will raise some RM4.6bil, thus also making it South-East Asia’s third largest IPO this year. The shares will be listed on Bursa Malaysia Main Market on Oct 19.
At RM3, Astro is valued at approximately RM15.75bil. When Astro All-Asia Networks plc was taken private in 2010, it was valued at RM4.30 a share or RM8.3bil.
Excluding the cornerstone and bumiputra investors identified by the International Trade and Industry Ministry, Astro shares have been more than 30 times oversubscribed. Astro is controlled by tycoon T. Ananda Krishnan.
Astro is selling 1.5 billion shares which represents 29.2% of its total issued and paid-up capital. Of the 1.5 billion shares, 31.2% are new shares and 68.8% are existing shares. Institutional investors have been allocated 1.26 billion shares and the remaining 259.9 million shares are made available to the public.
Astro was delisted from Bursa in 2010 following a privatisation by Ananda and Khazanah Nasional Bhd.
Among the research houses, ECM Libra Research has given Astro a fair value of RM3.09, while TA Research valued it at RM3.53 and OSK Investment Research at RM3.37.
A fund manager said the oversubscription of Astro shares probably reflected the fact that people saw upside for the stock over the near-term.
“I think many investors think they can make money upon its listing. They don’t intend to hold it for long. For the near term, they probably feel that the stock can go the distance. However on a fundamental basis, the earnings potential and dividend yield are not attractive. Over the next one to two years, how exciting are the prospects?” asked the fund manager.
Earlier, the market had widely speculated that the Astro IPO price would be RM3.60, which some observers regarded as expensive.
With the IPO price now fixed at RM3, the price earnings ratio (PER) of the stock is 24 times (x) for its financial year ended Jan 31, 2012. Several analysts still felt that this was on the expensive side. For FY12, the company made a net profit of RM624.1mil
For FY13, the PER will go up to more than 30x as management has guided for lower earnings on the back of its higher customer acquisition cost, finance cost and accelerated depreciation of its Astro B.yond set up boxes.
Analysts have net profit forecasts of between RM399mil and RM490mil for FY13.
With the group committing to pay out 75% of its earnings as dividends to shareholders from FY14 onwards, this translates to a dividend yield of approximately 2.6% based on FY14 estimates.
“While its IPO valuation may not appear cheap initially, there is upside potential given the existing low pay-TV penetration of 46%, a potential uptick in ARPU (average revenue per user) as subscribers migrate to the high-definition platform, its content superiority, and the high entry barriers to the pay-TV industry due to the high capex,” said an analyst from OSK Research.
TA Research considered Astro a monopoly in the pay-TV segment with 99% market share.
“It is a capital-intensive industry and creates a high barrier for new entrants. It has a buffet of content with 156 channels, of which 68 are homegrown channels,” said TA Research.
Astro’s closest competitor is Telekom Malaysia Bhd‘s Hypp TV.
Astro’s market share is made up of 3.1 million subscribers, who are predominantly residential customers. After operating in Malaysia for 16 years, the company’s penetration rate is at 50%.
“We foresee more growth opportunities, especially via its Internet Protocol Television platform, which is currently at an infant stage,” said TA Research.