Ananda Krishnan-controlled Astro Malaysia Holdings Bhd has denied receiving confirmation of a privatisation proposal that had prompted a buying frenzy among investors last week.
Media reports of a possible privatisation pushed the pay-TV operator’s share price up 22% to an intra-day high of 74.5 sen last Wednesday afternoon.
By day’s end, it pared its gains to close at a three-month high of 73 sen, a 19.67% rise that added RM625.2 million to its market capitalisation of RM3.81 billion.
A total of 72.04 million shares were traded — 12 times its two-month average volume of six million shares — placing it on Bursa Malaysia’s most actively traded list.
Last week, Astro hit its year-high of 76 sen as markets opened. However, the rally then started to fizzle out and by the close of trading, it had shed 8.22% or six sen to 67 sen.
The same day, Astro issued a clarification on an article by a business portal that mentioned a possible privatisation exercise involving the company. The article has since been edited, removing details of the proposed privatisation.
“The board of Astro Malaysia Holdings Bhd wishes to clarify that as far as it is aware, after making due enquiry, the company has not received confirmation of any privatisation proposal,” Astro said in its filing with Bursa Malaysia on the matter.
Astro no stranger to privatisation
It is no coincidence investors were caught up in the speculation that a privatisation is in the offing given that Astro is no stranger to privatisation exercises.
In 2010, its two major shareholders – tycoon Ananda Krishnan and Khazanah Nasional Bhd – took its predecessor Astro All Asia Networks PLC private at RM4.30 per share.
Two years later, the duo relisted the group at RM3 per share minus its overseas operations. Currently, Ananda controls a 41.29% stake while Khazanah has 20.67%.
Ananda has a track record of delisting and relisting his companies. He has undertaken a slew of privatisation and corporate exercises in the past, such as offers to delist Measat and Tanjong Plc.
This is not the first time Astro has been linked with a privatisation, and it probably won’t be the last. “We would not be surprised if Ananda does it a second time with Astro as there is potential for the company to be repackaged and spun off at a higher valuation,” Credit Suisse said in a note in 2019.
A less than ideal takeover target
However, the current iteration of Astro is not exactly the ideal takeover target as it has some RM3.55 billion in borrowings.
Furthermore, the business is facing various key challenges such as high content costs and loss of TV subscribers.
Astro’s TV viewership has continued to fall three years in a row, as online streaming services such as Netflix and Mubi eat away at its subscriber base.
This has been reflected in its earnings which declined 9.3% per year over the past five years. Revenue has also been falling every year over the last five years.
Earnings of the dividend paying media firm have been on the decline since its peak in the financial year ended Jan 31, 2018 (FY2018) when it booked RM770.64 million in net profit on RM5.53 billion in revenue.
For the nine-month period ended Oct 31, 2022 (9M FY2023), net profit fell 39% to RM204.29 million from RM334.29 million a year earlier. For the period, revenue fell 10.64% to RM2.81 billion from RM3.14 billion on decrease in merchandise sales and subscription revenue.
Astro has tried to stay relevant by introducing its own streaming service AstroGo and bundles including other streaming services.
It remains to be seen if these efforts are bearing fruit, as Astro announces its Q4 FY2023 results on March 27.
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