By LYDIA NATHAN / Graphic By TMR
Astro Malaysia Holdings Bhd’s stock is looking attractive following major shareholder Tan Sri T Ananda Krishnan’s buying spree in the open market since June this year.
Maybank Investment Bank Bhd (Maybank IB Research) noted that the third-richest Malaysian had bought 16.1m Astro shares during that period and increased his shareholding in the media entertainment group to 41.2% currently compared to 40.9% as at April 10, 2018.
“Bursa Malaysia filings do not reveal the price he paid for them. However, 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,” it said in a research report.
The research house also maintained an ‘Overwhelming Buy’ on Astro after trimming the company’s forecast core net profits by 2% to 3% with a target price of RM1.95.
“We believe that the recent under performance of Astro’s share price is unjustified. Its poor 2QFY19 (secondquarter of financial year 2019) results were suppressed by high FIFA World Cup content cost that will moderate going forward.
“We continue to like Astro thanks to its cheap valuations, high dividend yields, vote of confidence from insiders buying Astro shares and potential as a privatisation target,” Maybank IB Research said.
It also noted that Astro’s share price has fallen 19% since it announced its record low net profit of RM46.6 million for 2QFY19.
“We believe that the market has been overly bearish as the under performance was due to transiently high 2018 FIFA World Cup content cost, which compressed the earnings before interest, taxes, depreciation and amortisation (Ebitda) margin to only 20%,” it added.
The group had posted a net profit of RM16.6 million in its first half ended July 31, 2019 (1H19), a staggering decrease of 93% compared to its previous corresponding period.
This resulted in the group’s 1H19 core earnings dropping to RM191.3 million, much less compared to the RM442.2 million recorded a year ago.
Going forward, Maybank IB said its expects the company’s television (TV) subscription revenue to continue narrowing as consumer sentiment gra- dually recovers.
“Astro intends to offer privileges to only pay-TV subscribers to entice Android TV box and NJOI users into becoming pay-TV subscribers.
“While consumer sentiment is recovering, Astro concedes that it is still not easy to add pay-TV subscribers to generate subscription revenue due to piracy from Android TV boxes,” it said.
The research firm also said Astro plans to tie up with businesses that wish to tap into its access of 5.6 million local households in Malaysia.
Astro closed lower yesterday by 0.74% to RM1.34.