Measat- what's up?

On Monday, OSK Research had said in a report that there were plans to inject Maxis into Astro. This was quickly denied by Maxis (go here). Despite the denial, the share price of Astro continued to rise. Today, we see the share price of another of company linked to T. Ananda Krishnan, i.e. Measat rising sharply & hit the 30% limit-up price of RM1.58 at 11.45 am. At the same time, the price of Astro rose by 28 sen to RM3.44.

It is possible that the rise in the share price of these companies is connected to some corporate exercise, probably an offer by Astro to takeover Measat. The latter is 59.6%-owned by MEASAT Global Network Systems Sdn Bhd ('MEASAT GNS'), which is believed to be linked to T. Ananda Krishnan. Assuming that the above scenario panned out, an offer from Astro to buy out MEASAT GNS' stake in Measat will automatically trigger a Mandatory General Offer for the minority shareholders, unless an exemption is obtained.

What would be a decent price to induce an acceptance from the shareholders of Measat? Looking at the latest quarterly results of Measat, i.e. 1Q2009 ended 31/3/2009, we can see that Measat has a net tangible asset per share of RM4.39. Measat reported a net loss of RM41.5 million on a turnover of RM54.1 million. The net loss arose because of forex translation differences of -RM50.3 million. If the latter is excluded, Measat would report a net profit of RM9.2 million; giving it a EPS of 9.2 sen for 1Q2009. Based on this, Measat's annualized FY2009 EPS would be about 36.8 sen. At the limit-up price of RM1.58, Measat is trading at current PE of 4.3 times or Price to Book of 0.36 times. This means that Measat is currently inexpensive.

If you wish to speculate on the above, I believe that Measat could be a better bet. This is a high risk bet because if the speculated offer is not forthcoming, the share price of Measat could drop back sharply to RM1.00-1.20. Your trading BUY could well turn out to be a long-term BUY. Good luck.


Chart 1: Measat's weekly chart as at 4/6/2009_11.45am (Source: Quickcharts)


Chart 2: Astro's weekly chart as at 4/6/2009_11.45am (Source: Quickcharts)

Further thoughts on the results of 1Q2009

The operating profit increased from RM16.0 million in 4Q2008 to RM25.4 million in 1Q2009 due to the discontinuance of depreciation for Satellite M2 (lowering depreciation by possibly RM3.6 million) and a forex gain on US held deposit (of RM4.0 million in 1Q2009 compared to RM1.0 million in 4Q2008).

The persistence losses over the past few quarters, which was due to the delay in the launch of its new satellite, does not instill confidence of a sustained recovery in Measat going forward. That may explain why the latest results for 1Q2009, which was announced on May 28, did not spur buying interest in this stock. See the 8 quarters' results below.