Friday, September 28, 2007
The once-golden boy, dragged through the mud with their adventure in Indonesia, finally made the top ten volume stocks. This is more than aweek after the announcement that they are pulling out of Indonesia. If it was the Indonesia factor, the stock would have reacted much earlier. Hence there is a better than 50% chance we are seeing another privatisation from the AK's stable. Following up on my prediction of another privatisation possibility for Tanjong Plc - if all comes through almost all of AK's companies will be like him, very private.
Factors For Privatisation
a) Easier to do price hikes and whack the Malaysian subscribers as a private entity.
b) Pay TV and ARPU moving in the right direction again.
c) Cut out the cancerous Indonesian operations, limited downside.
d) Starting up in India, less problematic and better potential.
e) Earnings will drop enormously in 2007 and 2008, improvements will occur only in 2009.
f) The Indonesian experience brought on the realisation that: gestation period of a major project will weigh heavily on stock's performance; the start up period will not see improvements in bottom line - all strong factors to take the company private.
g) Management thinks that Astro is under appreciated by investors, not many willing to take a long term view on the stock.
h) Management thinks that the share price does not reflect the critical mass of subscribers in Malaysia.
i) After all the hoo-hah, the share price is still way below the IPO of RM4.50, why bother to list?
j) Does the company want to go through another 2 years of depressed share price (akin to the Indonesian experience) with their Indian operations?
A privatisation should see a bid of RM4.50 as a minimum because that's the value of just the Malaysian operations. Tag on a 10% premium and you have a doable exercise. Better to take it private and relist in 2009 when Indian earnings start kicking in.