Astro ... July 09

Sources say in a major restructuring exercise, it is hiving off its 20% owned Indian associate Sun Direct TV and returning some cash to shareholders.

The exercise will effectively result in Astro being solely an operator with local operations while the still loss making overseas unit will be acquired by major shareholders Usaha Tegas Sdn Bhd and Khazanah Nasional Bhd.

There is also speculation about plans to free up more cash as Astro, with some observers suggesting a lucrative 80 sen per share payout to get shareholders to agree to the corporate proposal.

Astro had Rm1.5 billion cash or 60 sen per share as at end April 2009, but it is in a net debt position of Rm362 million due to the drawdown of a US$186 million (Rm690 million) debt facility to finance its investment in India. If the debt from its Indian investment were to be taken out, Astro would be in a net cash position, but it would still be nowhere near the speculated 80 sen a share.

There is also unconfirmed talk of Astro hiving off its stake in Sun Direct TV in preparation for a merger with Maxis Communications Bhd’s Indian unit Aircel Ltd, currently Indian’s seventh largest mobile operator by subscriber base.

So far, one version of rumours about Ananda Krishnan mulling a major corporate exercise involving AStro has been officially denied.

Rumours aside, the fact is that Astro again has positive free cash flow, which is likely to grow together with its Malaysian business, now that there are no longer any material write offs from its discounted Indonesian venture.

Moreover, some RM454 million or two thirds of the US$186 million investment Astro intends to put into its 20% owned Indian associate Sun Direct TV had been spent as at end April 2009.

Astro’s free cash flow, which dipped into the red from 4Q2008 turned positive again in 4Q2009 at Rm44 million. The level of free cash flow is seen as an indicator of a company’s ability to return cash to shareholders. Its free cash flow level more than doubled to Rm103 million in 1Q2009.

Management recently said that it has no plans to re enter Indonesia and only expects to incur some RM4 million cost per quarter due to the ongoing legal cases there that arose from its decision to exit in Aug 2008.

At present, Astro pays out 50% of the next profit from its Malaysian operations as dividends to shareholders.

Management had said previously that it may consider floating Sun Direct TV once its cash flow turns positive sometime in 2013.

Expectations are that should there be a deal, it would be one that is positive for minorities given that any offer would require the approval of Khazanah Nasional and the EPF. Khazanah owns 21.4% while the EPF owns 7.37% as at May 29. Ananda controls 42.35% of Astro.

Related:-
MAXIS/Astro/Measat ... Jun 09

ASTRO ... Oct 08