Analysts neutral on Astro’s AWT disposal

KUCHING: Astro Holdings Bhd’s (Astro) disposal Advanced Wireless Technologies Sdn Bhd (AWT) from its wholly-owned subsidiary, MBNS Multimedia Technologies Sdn Bhd (MMT), garnered neutral views from analysts as the entity’s contribution to the whole group is minimal.

In a recent filing on Bursa Malaysia, Astro announced that its wholly-owned subsidiary MMT entered into a share purchase agreement with Maxis Bhd (Maxis) to dispose off 833,334 ordinary shares, which represents 25 per cent of the total issued and paid-up share capital in AWT.

This agreement was for a cash consideration of RM15.83 million and the purchase of goods and services by Maxis from MMT totalling RM3

million. research arm of Hong Leong Investment Bank Bhd ( HLIB Research) pegged a neutral view on this agreeement.

It said, “Overall, we are neutral on the disposal as its contribution to the whole group is minimal.

“However, we believe the disposal will allow Astro to streamline its operations and give more focus to its core business strategies and further strengthen its balance sheet.”

It noted, since 2004, MMT has been holding 25 per cent equity interest in AWT which in turn wholly-owns UMTS (Malaysia) Sdn Bhd (UMTS) which is the holder of a 2100MHz spectrum assignment from MCMC expiring on April 1, 2018.

“The divestment of MMT’s interest in AWT is done as it is not part of the core business of Astro and its subsidiaries. It is commercially viable for MMT to divest its investments in AWT before the

expiry of the spectrum assignment, as the renewal cost of the spectrum assignment is expected to be high and might require additional funding from AWT’s shareholders,” it added.

The research team also pointed out that AWT group recorded a profit after tax (PAT) of RM8.1 million in the financial year 2016 (FY16) which made up circa 1.2 per cent of Astro’s core earnings.

“The group estimates a one-off loss of circa RM12.1 million on the disposal based on the carry value of investment in AWT of RM27.9 million. However, the cash consideration of RM15.8 million will improve its cash position by 2.8 per cent,” it said.

Overall, HLIB Research maintained a ‘buy’ call on the stock. It said, “We like Astro due to its monopoly in the pay-TV segment, increasing penetration in the local households, innovative home shopping business, its move towards gaining regional eyeballs and ability to attract advertising expenditure (adex) despite the overall soft consumer and business

sentiment.”