Asian Pay Television Trust: Guiding for 11% yield for 2018 November 14, 2017

PSR Recommendation: ACCUMULATEStatus: DowngradedTarget Price: SGD0.64
  • 2Q17 revenue and EBITDA were in-line with our estimates.
  • Management has guided 2018 DPU at 6.5 cents (10.7% dividend yield), unchanged from 2017.
  • We downgraded to ACCUMULATE with an unchanged target price of S$0.64. Our downgrade is due to the price appreciation of APTT and the resulting lower expected return. There has been no change in fundamentals.

Results at a glance

1

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.

Comments

2 Comments on "Asian Pay Television Trust: Guiding for 11% yield for 2018"

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Philip
PhilipNovember 19, 2017 10:48 pm

Hi Paul
APTV relies on debt to pay its DPU as its free cash flow is inadequate resulting in its leverage creeping up. Is it a concern ? The reduction in Capexp in fy 2018 to $45 million is a strong mitigate to the increasing debts ?
APTV has very large contingent assets in the form of goodwill and licences. Real asset is not substantial. Is this a negative? Tks

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About the author

Profile photo of Paul Chew

Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has almost 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.

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