Results at a glance
The Positives
+ Management has guided 6.5 cents DPU for FY18. This is unchanged from FY17 and still represents a 10.7% dividend yield.
+ Cable subscribers were stable and churn remains low. Cable subscribers were stable QoQ at 762k and churn rate low at 0.7%.
+ CapEx will decline in FY18e. As the lumpy analogue switch-off ends this year, we expect total CapEx to decline from S$80mn in FY17e to S$45mn in FY18e.
The Negatives
– ARPU remains sluggish. ARPU across all 3 business segments – pay-TV, broadband and premium TV – declined QoQ. Broadband ARPU was lower in-view of the unlimited 4G data plans offered by mobile operators. The lower ARPU in premium TV is to stimulate pick-up rate of this services. However, we have not seen much growth yet.
– Still reliant on incremental debt to sustain dividends. Our estimated FCF is around S$20mn in 3Q17. This remains below the S$23.3mn needed every quarter to sustain dividends.
Outlook
The outlook remains stable. We shaved our FY17e earnings by 15% due to higher FX loss and higher effective tax. As we enter 2018, cash flows should improve as CapEx for premium digital ends. There is no change in our target price.
Downgrade to ACCUMULATE rating with target price unchanged at S$0.64
Our downgrade to ACCUMULATE is due solely to the price appreciation of APTV. There is no change in the fundamentals of the company. APTV dividend yield is attractive and sustainable. Operating cash-flows are supported by a recurrent monthly cable TV subscription fees and APTV operates in a monopolistic environment.
Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.
