Saturday September 22, 2012
Positive response to Astro IPO
By B.K. SIDHU
KUALA LUMPUR: Just two days after Astro Malaysia Holdings Bhd began its book-building exercise for its institutional offering, its shares have been oversubscribed by more than 10 times. The oversubscription rate could well be higher since the closing of the book is only on Oct 3.
The country's largest pay TV broadcaster, which claims to control 50% of the six million Malaysian TV households, launched its prospectus yesterday and has priced its retail offering at RM3 a share. Retail investors have until Oct 1 to subscribe for the shares and the final pricing for the shares will be fixed once the book closes on Oct 3.
“This is just the beginning... and we hope the reception (for the shares) will get even better,” he said.
Astro is returning to Bursa Malaysia after it was taken private in 2008 and for its IPO, it is raising RM4.55bil.
Of the RM4.55bil, RM3.12bil is gross proceeds from an offer for sales of shares and accrued to Astro Networks (M) Sdn Bhd, and the remaining RM1.42bil is from the public issue.
Apart from institutional and retail investors, the broadcaster has secured 22 cornerstone investors for its IPO and the biggest block of shares under the cornerstone allocation is taken up by Permodalan Nasional Bhd. The lock-up period for the cornerstone investors is three months after its listing date on Oct 19.
Astro is the third largest IPO in the country and it expects a market capitalisation of RM15bil. This is also the third company within the stable of companies owned by Malaysia's second richest man T. Ananda Krishnan to return to Bursa after they were taken private.
According to a report, Malaysia is home to three of the world's six largest IPOs by companies this year and the demand for shares from institutions outstripped supply when Felda Global Ventures Holdings Bhd raised US$3.3bil in June and IHH Healthcare Bhd sold US$2.1bil of shares in Kuala Lumpur and Singapore in July.
Astro's rationale for returning to Bursa was to provide it access to the capital markets to source funding for its expansion.
From its inception, this pay-TV operator has grown by leaps and bounds and its offering is now available on multiple platform that allows it to access new target markets.
Astro chief executive officer Datuk Rohana Rozhan said growth was about “servicing our existing customers by providing the right value propositions and content. We are also moving out of living rooms to provide Astro-On-The-Go and will bundle TV and radio services on broadband and provide existing and new channels on high definition.” With that Astro can now tap into a “100% addressable market” which is about 7.5 million households.
Rohana said capex would be 11% of revenue by 2014 and maintenance capex will be 4% to 5%.
Astro reported net profit of RM629mil for financial year ended Jan 31, 2012 on the back of RM3.8bil revenue. For first quarter-February to April for FY13, Astro reported net profit of RM123mil.
Astro has borrowings to the tune of RM3.7bil and although it intends to pare debts down with the proceeds from the IPO, its debts would still be high but Nazir contends that “the company is correctly leveraged and it has an acceptable gearing level.”
Of the proceeds from its public issue of RM1.42bil, it intends to use RM750mil for capital expenditure within 36 months, RM500mil to repay bank borrowings within a year, and RM112.90mil as working capital. Its listing expenses amounted to RM60mil.
Astro, in its prospectus, said it would adopt an active capital management and propose to pay dividends out of cash generation from its operations after setting aside the necessary funding for capital expenditure and working capital needs.
“We target a payout ratio of not less than 75% of our consolidated profit for the year in each financial year beginning Feb 1, 2013,” Rohana said.
Upon completion of the exercise Astro Networks will own 70.8% equity stake in Astro and the investing public will hold the remaining 29.2% stake.
Investing community has differing views on the stock