KUALA LUMPUR: The additional RM735 million tax bill on Astro Malaysia Holdings Bhd will erode its shareholder fund and push its net tangible asset deeper into the negative territory, analysts said.
News of the extra tax liability also sent Astro shares down to a 52-week low, or by as much as 10 per cent, on Friday.
The Inland Revenue Board (IRB) served the company with notices of additional tax for assessment years 2019 to 2023 totalling RM734.88 million including penalties.
In a filing to Bursa Malaysia on Thursday, Astro said the additional tax was imposed on its subsidiaries Astro Shaw Sdn Bhd and Measat Broadcast Network Systems Sdn Bhd.
Astro Shaw was taxed another RM22.01 million, while Measat Broadcast Network with an additional RM712.87 million.
The notices were issued as the production costs incurred during the years of assessment were disallowed for deduction.
Astro Shaw and Measat Broadcast Network were given 30 days to appeal against the decision.
"Based on legal advice obtained, Astro Shaw and Measat Broadcast Network are of the view that there are fair and reasonable grounds to defend against the Notices.
"Therefore, both Astro Shaw and Measat Broadcast Network intend to appeal and if required, initiate legal proceedings to challenge the basis and validity of the notices raised by the IRB," Astro said.
Kenanga Research said the additional tax liability will erode Astro's shareholder fund by 65 per cent to RM434 million, from RM1.13 billion as at end-April 2024.
The tax will also push the company's net tangible assets 14 sen deeper into negative territory to -27 sen, from -13 sen.
"Assuming a full settlement, Astro's net debt and gearing of RM3.1 billion and 2.1 times as at end-April 2024 will rise to RM3.8 billion and 9.8 times, assuming debt is raised to pay for the additional taxes," Kenanga Research said today.
The firm remains cautious on Astro due to intense competition from over-the-top streaming platforms for international content and free-to-air TV for vernacular content, inflated cost base that includes legacy expenses and competition from digital music streaming platforms that leverage on artificial intelligence to offer personalised content and targeted commercials.
It maintained an "underperform" call on the stock with a target price of 25 sen.
Astro was one of the actively traded stocks on Friday, with its shares plunging to a 52-week low to 28 sen, down as much as 9.6 per cent in early trade from its closing price of 31 sen on Thursday.
The stock opened 6.5 per cent lower at 29 sen and ended the day similarly at the level.
Shares in Astro have tumbled more than 23 per cent year-to-date as it faces competition from over-the-top media services.
For the first quarter ended April 30, 2024, the company's net profit climbed to RM17 million from RM15.9 million in the corresponding quarter the previous year.
Astro said the higher profit was due to lower net financing costs driven by favourable unrealised forex gains arising from unhedged lease liabilities, offset by lower earnings before interest, taxes, depreciation and amortisation, higher amortisation of intangible assets and tax expenses.
Its revenue, however, slipped 9.9 per cent to RM772.53 million versus RM856.94 million a year ago due to reduction in subscription and advertising revenue.