• 2Q21 results in line, with 1H21 revenue and EBITDA at 49%/51% of our FY21e forecasts. Quarterly DPS of 0.25 cents declared, as guided.
• Revenue was 3% YoY lower to S$73.7mn. Cable TV fell 5%. In contrast, broadband grew 8%. FCF rose 70% YoY to S$23mn following lower capital expenditure.
• Our BUY rating and target price of S$0.15 are unchanged. Stock remains pegged at 9x FY21e EV/EBITDA, a 20% discount to Taiwanese peers on account of its smaller scale, higher leverage and weaker growth prospects. Forecasts largely unchanged except for capex, which has been lowered by S$5mn. Dividend yield of 7.6% or S$18mn distribution well-supported by FCF of S$82mn. Further upside potential when 5G data backhaul is rolled out to mobile customers. We have not modelled any revenue from 5G.

The Positives

+ Resilient broadband growth. Broadband subscriber net adds were 9,000 in 2Q21, the highest on record. Attractive pricing plus partnerships with various mobile operators helped.

+ Capex structurally lower. Capex trended at 25-30% of revenue from 2015 to 2017. 1H21 capex declined to a low of 11% of revenue. Investments in fibre have peaked and capacity is sufficient to meet current growth in broadband subscribers and future 5G data backhaul requirements.

The Negative

– Cable TV still declining. Cable TV revenue fell 3% YoY to S$56.7mn The decline was evenly spread between subscriptions and non-subscriptions. Cable TV subscribers are on a secular decline due to piracy and over-the-top TV. Broadband will be key to revenue sustainability.

Outlook

Expect stable operations. Group revenue is dependent on broadband to stem the decline in cable TV. Adjusted FCF remains strong at S$82mn, far exceeding its S$18mn dividends. FY22e dividends will be guided in 3Q21 results.

Maintain BUY and target price of S$0.15

Current yield of 7.6% is well-covered by healthy cash flows. Catalysts are expected from 5G data backhaul, though the timing is unclear as mobile operators have been prudent on spending.