Dividend yield of 4% for those who wait
Start-up losses and provisions for ventures abroad have dragged Astro All Asia Network plc into the red for four straight quarters, clouding the fact that its Malaysian operations are still robust and generating healthy cash flow. It didn't help that its numbers for 3Q2008 ended Oct 31 came in way below street expectations, largely due to an unexpected RM264 million provision for Indonesia.
Astro may have to set aside another RM75 million in provisioning for its Indonesia operations in 4Q, but this is a non-cash item which does not affect cash flow.
While there is a chance that Astro may join hands with another Indonesian partner after having severed ties with Lippo Group, re-entry terms, if any, are likely to be better for Astro. Moreover, conditions are fluid in Indonesia, with 2009 being an election year.
In the absence of large provisions for Indonesia in 2009, Astro is likely to return to the black as a group, given that its portion of losses in India in 2009 is not expected to exceed profits in Malaysia. That could somewhat boost sentiment, although a stronger US dollar means content cost is going up.
Still, at its RM2.28 close on Dec 30, 2008, Astro was trading at only 56% of its initial public offering price of RM4.06. It was also trading at a 24% discount to an already conservative discounted cash flow valuation of RM3. It would only take RM3.4 billion for tycoon T Ananda Krishnan (who owns 42% of Astro) to privatise the company at RM3 apiece. But for this to happen, the maths would have to be worth his while.
For now, investors can expect to receive a steady stream of dividends as Astro goes through "growing pains" abroad. Its board had promised to distribute at least half the profits generated in Malaysia as dividends to shareholders. Dividend payout for FY2009 ending Jan 31 is expected to amount to RM193.2 million or 10 sen a share (with 2.5 sen per share tax exempt declared every quarter). For FY2008 ended Jan 31, Astro paid 10 sen a share. At current levels, dividend yield is in excess of 4% for investors who are willing to stick around for value to emerge.
