+ Cable TV ARPU flat QoQ. ARPU finally stabilise QoQ after falling for 13 consecutive quarters. However, subscribers are still contracting at a rate of around 5,000 per quarter.
+ Broadband revenue turning more stable. Another positive operating data was the flat QoQ broadband revenue. Subscribers responded well to the lower prices, as a result, Broadband subscribers rose 10% YoY in 4Q19. However, the pricing strategy resulted in a 12% YoY fall in ARPU. Nonetheless, this is a high margin business as there is no content cost and only the modem cost during installation.
+ Content cost falling to stabilize EBITDA. The run-rate for broadcast cost was around S$16mn per quarter two years ago. This has declined to around S$13mn in FY19. 4Q19’s content cost was down almost 11% YoY.1
– FY19 capex still elevated. FY19 Revenue and EBITDA is down around 6% YoY. However, capital expenditure remains unchanged at $75mn. Capex was incurred to deploy more fibre in the network, especially for the data backhaul business. Guidance is for capex to trend down in FY20e. Another drain on cash-flow was $20mn spent on intangibles in FY19.
There are some positives we can look forward to in FY20e for APTT – (i) Further signs of stability in operational data which will signal business sustainability; (ii) Capital expenditure (and investments in intangibles) will start to trend downwards, as guided by APTT; (iii) Revenue from data backhaul from Taiwan mobile operators begin to contribute more meaningfully to APTT.
Maintain NEUTRAL and target price unchanged at S$0.165
Our target price of S$0.165 is maintained. We raised our FY20e EBITDA by 3% as we revised our revenue estimates upwards, and lowered further content cost. We peg APTT at around 10x EV/EBITDA. This is a 10% valuation discount to its much larger Taiwanese peers (Figure 2).
We look for further signs of revenue or EBITDA to stabilise before any re-rating and valuation discount to peers to be even narrower.