Asian Pay Television Trust: Still a 12% yield and paid quarterly May 16, 2017

PSR Recommendation: BUYStatus: MaintainedTarget Price: 0.64
  • 1Q17 revenue and EBITDA were within our estimates. However, several non-cash items negatively affected headline earnings, namely FX and derivative loss. Both were the result of a stronger Taiwan dollar
  • We are lowering our earnings by 18% to incorporate these non-cash items. No change to our cash-flow assumptions or target price.
  • Dividend guidance of 6.5 cents annually (paid 1.625 cents per quarter) has been maintained

1

The positives

+ YoY growth in revenue driven by cable TV: This was the result of 4% yoy improvement in subscribers.

+ Subscribers were stable: Cable TV subscribers were flat qoq. There was also pick-up in premium digital subs.

+ DPU guidance maintained: Management reaffirmed their full year distribution of 6.5 cents, payable 1.625 cents per quarter

+ Lower interest rates in future: The new trustee manager was successful in negotiating for a 30 basis points reduction in interest rates, effective 30Jun17. This implies an almost S$4m interest saving on the NT$28b (S$1.3b) loan.

The negatives

– Higher than expected income tax: The jump in tax came from the almost doubling of deferred taxes.

– Higher than expected staff cost: This was due to long-term incentive plan for senior management.

Outlook

The outlook remains stable. We lowered our net profit by 18% to account for higher deferred tax, foreign exchange and amortization of debt financing fees. No change to our target price or cash-flow assumptions.

Maintain “BUY” rating with target price unchanged at S$0.64

We maintain our BUY recommendation with an unchanged target price. The adjustments to our earnings are non-cash and do not materially affect our valuations. We find APTV dividends attractive and sustainable. It operates a monopolistic business where revenues are recurrent and barriers to entry high.

 

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About the author

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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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