MEDIA (OVERWEIGHT) Sector News Flash: Is ASTRO coming back?

THE BUZZ

As reported by various media, Astro All Asia Network (ASTRO), Malaysia’s largest paytelevision broadcaster owned by Tan Sri Ananda Krishnan, has been approached by investment bankers about a possible share sale and Initial Public Offering. It is said that ASTRO could raise about USD1.5bn (RM4.6bn) in an IPO as soon as  the  end of this year.

OUR TAKE

Privatised in 2010. To recap, ASTRO was taken private by Astro Holdings (AH) on 14 June 2010, which  already  owned 72.91% prior to the  privatisation. Note that AH  was formed by billionaire Ananda Krishnan with 42.34%, Khazanah with 21.39%, EPF with 8.61% and Tun Mohammed Hanif Omar with 9.81%. At the privatization price of RM4.30 per share, the share was pegged at 30x 1 year forward PER and 9x EV/EBITDA.

Potential valuation of ASTRO. Looking back at what Ananda Krishnan has done on the  relisting of Maxis, we believe ASTRO will strip off  the 20% stake held in its Indian asset, SunDirect TV, the largest  Direct-to-Home pay  TV in India with household subscribers of 5 million, which reported core losses of RM100m p.a in 2010, prior to the IPO. Thus, stripping off this asset, we estimate ASTRO could make a PBT of RM530m. Assuming ASTRO’s Malaysia operation makes about RM450m p.a and assuming a PE of 25x, the potential market capitalization of ASTRO could be as big as RM11.25bn. Without its overseas operation, ASTRO is actually a cash cow, with EBITDA of about RM750m-800m. Also, with 4.1m subscribers back in 2010 and given Malaysia has only 6.5m households, we expect its subscriber’s growth to  stabilize  at the mid single digitlevel.

Boosting his cash pile here  for India? We believe should the IPO materialize, it will primarily involve  an  offer for sale of existing shares based on what we saw in Maxis’relisting back in 2010. This jives well with the rumors that Tan Sri Ananda Krishnan is beefing up his cash hoard following the sale of Pan Malaysia Pool and his Power Assets to 1 Malaysia Development Berhad. We believe the billionaire would likely plough back his cash into his existing telco business in India especially given the ongoing legal suit filed by India’s Central Bureau of Investigations

Sector re-rating. Should ASTRO make a comeback to the local bourse, we believe it will be a major re-rating for the Media sector given that it could emerge as the largest Media stock in Malaysia with an estimated market capitalization of more than RM10bn. We see Media Prima (BUY, FV RM3.01) as the likeliest candidate to have a potential upward rerating since it is the closest peer to ASTRO, and is the current single largest listed media company within the free-to-air television segment.  

Source: OSK188