Astro: A long term play

In this post,i would like to share one of the hidden jewel overlooked by the financial community.With the boom in the commodities and Oil & Gas industries,all attention seems to be focusing on companies in these industries. This has left some jewels to be undervalued.

By valuation,Astro’s operation in Malaysia is estimated at RM 4.30 (TheEdge,31/12/07). Compared to the current price of RM 3.70, the price provided a safety margin of around 14%. This valuation is only based on financial numbers only.

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If you look at management side of the valuation, Astro has the best corporate governance. Let’s look at what happened to A.K’s companies like Tanjong plc, Measat and Maxis. We can be sure that A.K has always created value for its shareholders in long term. The companies which A.K controlled never destroyed value in long term. In short term,the share price is a bit bumpy. But that’s business.Without taking risk,a company will not grow.And growth caused money! (TheEdge)

Many financial analysts just look at short term. They reported losses in Astro as something bad. Do you want a company which keep on growing or just sit there? Being in a business myself, i saw the potential that A.K wanted to seize in India and Indonesia. In the world of globalisation,those who refuse to fight will be wipe out.That’s why A.K took all his companies out from M’sia even before the globalisation idea came into Malaysia.

The next thing you might want to ask is the level of risk that Astro is taking currently.A company can crumble because of bad management and financial factors.In term of management,there is no doubt that the management is extremely great people.Just check out their profile.Next,is the cash part.Astro has very healthy cashflow and currently has no borrowings plus Astro’s account has over RM 1 billion cash in its account.That means around RM 0. 50 per share.If you buy it at RM 3.70,you are paying RM 3.20 for Astro only and get the cash for free.It offers a 26% of safety margin over its RM4.30 valuation.

If you pay RM 3.70 today (actually you are paying only RM3.20), what do you get in return? Let’s me explain this in two parts: Venture in Indonesia and India. No point discussing about Malaysia because we know Astro has satelitte pay-tv license until 2017.

Indonesia’s Venture (Please read the following news)

News 1

News 2

Astro, the dominant satellite tv operator in Malaysia, is hoping to finalise arrangements with the Jakarta-based Lippo Group to jointly operate an Indonesian satellite pay tv service undertaken by Lippo’s unit, PT Direct Vision, in a preliminary deal that was concluded in March this year.

News 3

The Lippo Groupis a giant conglomerate based in Jakarta, Indonesia, with interests in banking, finance and other enterprises. Its flagship, Lippo Ltd., listed $3.6 billion in assets in 1995. The firm owns only one small bank in the United States but has extensive interests in Indonesia, Hong Kong and China. It was founded by Mochtar Riady, an ethnic Chinese born in Indonesia.

News 4

Khazanah Nasional Bhd and CIMB Group have decided to merge Lippo Bank and PT Bank Niaga of Indonesia to comply with Bank Indonesia’s single-presence policy.

Bank Niaga, a 64%-owned subsidiary of CIMB Group, has submitted Khazanah’s plan to merge the two banks to the Indonesian central bank.

The single-presence policy requires those who control two or more banks in Indonesia to merge them, sell their stakes or form a holding company for their banks by end-2010, and are required to submit their plans by Dec 31.

Khazanah owns a 93% stake in Bank Lippo and 64% indirect stake in Bank Niaga via CIMB.

News 5

“The operators of the Astro service, MEASAT Broadcast Network Systems, are a wholly owned subsidiary of Astro All Asia Networks plc, a consortium company comprising of government-linked and private companies. Major shareholders include the Usaha Tegas Group (42.7%) and Khazanah Nasional Berhad (21.6%). Astro was listed on Bursa Malaysia in October 2003”.

….continue

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6 Responses to Astro: A long term play

  1. […] Bridge Street wrote an interesting post today onHere’s a quick excerptIn this post,i would like to share one of the hidden jewel overlooked by the financial community.With the boom in the commodities and Oil&Gas industries,all attention seems to be focusing on companies in these industries. This has left some jewels to be undervalued. By valuation,Astro’s operation in Malaysia is estimated at RM 4.30 (TheEdge,31/12/07). Compared to the current price of RM 3.70, the price provided a safety margin of around 14%. This valuation is only based on financial numbers only. If you look at management side of the valuation, Astro has the best corporate governance. Let’s look at what happened to A.K’s companies like Tanjong plc, Measat and Maxis. We can be sure that A.K always created value for its shareholders in long term. The companies which A.K controlled never destroyed value in long term. In short term,the share price is a bit bumpy. But that’s business.Without taking risk,a company will not grow.And growth caused money! (TheEdge) Many financial […] […]

  2. momo says:

    Dear cuteboy,

    To be a better value investor,
    Dont forget to list down the negative points too.
    The best time to list the negative points is before you buy the shares.
    Do remember this before you make your next buy. You will understand what I mean.

    You are buying astro because of its growth potential. But be ready if you really miss something. Ask yourself what if this not happen … and what if that happen … and then what will happen ?

    Have you been to India and Indonesia and watch the local channel that are available ? How about locality assessment ? Ability to subscribe or pay the monthly fee ? The alternative to astro like satellite dish which is illegal in malaysia but legal in their countries. Penetration, infrastructure, human resources that are availabe ? Political, culture and social stability ?

    It very important to avoid the love-blinded illusion after owning a stock. For eg. keep focusing on total population rather than true available market. Focusing on pay TV competitor and forgeting the competition might come in the form of free TV and free satellite TV which include astro channels.

    Don’t get me wrong. I do not mention the positive points because you already did.

    You have already value the Astro share if everything go as plan also known as ‘max’ value, but as a value investors, you must value the share if everything dont go as plan as well also known as ‘min’ value . If the current value is below this min value, then you have the ‘margin of safety.’

    It is just a reminder, and i am not saying 3.70 is not attractive.
    And meanwhile, continue to value other shares to sharpen your skills and follow thru them eventhough u do not own them, as a way to evalute your methods.

  3. Not Really says:

    Incase you didnt notice yet, one of the reasons why people are not buying Astro is because:

    http://www.depkominfo.go.id/portal/?act=detail&mod=berita&view=1&id=BRT060418091601

    1) Measat 2 has no Landing Right in Indonesia.

    2) Depkominfo has stopped PT Direct Vision (Astro) operations in Indonesia.

  4. boyboycute says:

    I guess ‘Not Really’ do not know Indonesia well.I had been to Indonesia for many years for business affairs.Things are not that obvious there.But one thing for sure.Anything can happen there if you know how to negotiate with the locals.

  5. […] For Tanjong plc,it needs less explanation as its revenue base has been diversified globally.Astro is undergoing the same transformation into a global company.Astro is currently expanding its wings to India,Indonesia,China and U.K.See news about Astro here. […]

  6. […] have analysed Astro in the previous article. For those who bought Astro when it was at RM 3.20 last year, I congratulate you. You must be […]

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