AUN 3.33% 15.5¢ aurumin limited

austar in red but looks rosier, page-2

  1. 4,941 Posts.
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    Hi Gosh,

    The numbers for Austar still concern me, despite being tempted to return to the stock today (did not do so, having last exited from the stock @19.5c).

    Based on today's Q1 report, AUN's EBITDA position improved to -$1.0m, compared to -$21m in Q4fy01.

    Ordinarily, this would be considered great news. hence, today's rise in the share price.

    But, upon a closer examination of the numbers, the following was more pertinent:
    1)
    Q1fy02 revenue of $84.785m, down $178k on Q1fy01 results of $84.963m.
    2)
    Q1 revenue down ~$1.5m on Q4fy01 revenue of $86.310m.
    3)
    ARPU continuing to decline with Q1fy02 ARPU of $52.55, compared to $54.10 in Q4fy01, and $54.72 in Q1fy01.
    4)
    Churn rates @2.78%, up on the 2.54% rate in december, and virtually unchanged on the March 2001 rate of 2.73%.
    5)
    A subscriber base of 429,233 customers in March, compared to 432,056 customers in December, and 426,663 customers in March 2001.
    6)
    Overall PayTV revenue down 0.70% on March 2001, and 1.17% on December 2001, resulting in $71.448m in March, compared to $72.294m in December, and $71.950m in March 2001.

    Overall, subscription growth has stayed, whilst PayTV revenue has started to decline.

    If not for the cost cutting measures, previously announced, and the tigher cost controls now being exercised, together with the continuing improvement in the AUD/USD FX rate, Austar's reported results for March would have been much worse.

    Elsewhere, Austar's mobile business is generating miniml revenue for $2.05m for the quarter, based on >15,000 subscribers and a monthly ARPU of $39.37, down significantly on the $47.73 rate recorded in December 2001, and very heavily on the $63.29 ARPU result for March 2001.

    Similarly, Austar's data services business is in decline with March revenue of $4.228m, , based on 68.5k subscribers, for an ARPU value of $17.78.

    The March ARPU value compared unfavourably, however, to the December ARPU value of $18.82 (72,196 connected customers), and the March 2001 ARPU value of $23.67 (84,166 connected subscribers).

    Granted, some of this occurred as a result of Austar swapping out some of its customer mix (ie: busines, vs residential, etc).

    However, of real concern was the following observation from today's announcement:
    "A decrease in revenue from the pay tlevision service of $0.8 million primarily due to a decrease in the average number of subscribers AND A DECREASE IN THE AVERGAE REVENUE PER SUBSCRIBER AS A RESULT OF CERTAIN CUSTOMER ACCOUNT MANAGEMENT ISSUES IN THE BILLING SYSTEM".

    The highlighted statement bears further explanation which so far has not been forthcoming from the Company.

    Conversely, XYZ's revenue was down 28% on Q1fy01 results, and 3.0% on Q4fy01 results. In March, XYZ revenue was $18.7m, compared to $19.3m in December, and $26m in March 2001.

    Again, management's explanation of this was that:
    "A decrease in revenue from the Com[pany's subsidiaries reflcting the higher sales in the 4th quarter of 2001 relative to the first quarter of 2002 as a result of the increased sales associated with the Christmas period".

    Granted, this is a seasonal influence, and explains away the vagaries of December vs March quarterly readings. It does not, however, explain away the >25% decline in revenue associated with the March on March readings.

    As at 31 March (and as previously reported), Austar's cash balance stood at ~$60m, down from $103m at 31 December.

    Going forward, Austar's net asset deficiency currently stands at -$169m, compared to -$123m at 31 December 2001 (a deterioration of $46m over the quarter).

    With Austar's subscription base in gradual decline, and its ARPU declining at an accelerating rate (ie: compared to the rate of decline in the number of subscribers), Austar will need to generate substantial additional cost savings in order to:
    1)
    generate spare cash;
    2)
    improve the cash balance in the bank; and
    3)
    recover ground in the business.

    Austar, however, appears to lack sufficient cash resources to drive new business growth. As such, any movement on this front will not eventuate in the absence of:
    1)
    a further, dilutionary capital raising;
    2)
    divestment of other business interests (such as XYZ, Telstra Saturn, etc); or
    3)
    a merger with FoxTel.

    As a going concern, Austar is still treading water, but is not yet insolvent. If, however, its churn rate were to increase beyond 4%, and its ARPU values were to decline below $50 (ie: subscribers opting for cheaper packages, or taking the basic service without the tiered extras), then Austar's EBITDA loss would very quickly blow out beyond $6m per quarter, leaving it with ~6 -7 quarters of remaining cash (all other things left constant).

    For these reasons, I believe that Austar's future is not yet assured, but that its impact will remain. In other words, Austar may not necessarily survive in its current form, but its presence throughout rural Australia will remain in some shape or another.
 
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