Astro (6399)

Hi Readers,

Back in June 2018, Astro was removed from the 30 stocks of FBMKLCI component index following a semi annual review by Bursa Malaysia and FTSE Russell.  This is due to the fact that Astro was among the worst performers as of Nov 2017 when the KLCI was last reviewed as its market cap fell by 53.9% to RM6.83 billion from RM14.8 billion on Nov 30. The share price dropped from a high of $2.90 in Oct'17 to low of $1.30 by May'18. A new low of $1.05 by Nov'18. 

What has changed since then was that Astro share price was moving within a major triangle consolidations as shown in Image 1 below. 

Image 1: Astro share price performance

The fact that it is in triangle consolidations, there is possibility that it will trigger a breakout upwards or downwards. Hence, there is a need to dig further into its performance and future trends to determine trading/investment opportunity.

Astro shares is heavily owned by institutions; more than 87% based on the top 30 shareholders list in its annual report. Any move by institution tends to be a strong signal as institution has access to information that retailers does not have. It will be months later before retailers get a hand of the information. To observe institution moves, I am depending on the top 30 shareholding list in annual report; which is a year later. Hence, I did a comparison between top 30 shareholders in 2018 annual report and 2019 annual report. While there are changes, the ones highlighted in red in Image 2 are new addition to the list.

Image 2: Top 30 shareholding based on 2019 annual report

Based on the changes above, there is evidence that the funds/institutions believed that Astro will continue to pay dividend and possibly undervalued. Looking at its financial performance and dividend yield as shown in Image 3, I did an estimate calculations to determine its intrinsic value as shown in Image 4 using target price of $2.00 given by investment banks (IBs) such as Public Bank and Kenanga.

Image 3: Astro FY19 Quick Facts and Financial Highlights extracted from its 2019 Annual Report

Image 4: Astro's Intrinsic Value

Using the target price given by IBs of $2.00 and assuming Astro continues to pay 9 cents dividend per share and my 15% required rate of returns, the intrinsic value for Astro is $1.65. What it meant for me is that if Astro share price is below its intrinsic value, its a good buy based on its dividend payout. 

Combining both the financial performance and technicality of its price actions, few possible trade setups can be considered:

• Astro as Dividend stocks
• Entry: Buy below intrinsic value
• Exit: When it reaches the target price
• Remarks: One can leverage the power of zero cost averaging when the price hits your own target or when it hit the target valuations to generate additional cash flow

• Astro as Trading stocks
• Entry: Breakout above the upper line of the triangle (>$1.42)
• Stop Loss: $1.23 and below
• Exit: According to your own rate of returns or the levels (Image 1)

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence as this article is not a recommendation to buy/sell.