Asian Pay Television Trust: Still yielding an attractive return February 28, 2018

PSR Recommendation: ACCUMULATEStatus: MaintainedTarget Price: SGD0.62
  • 4Q17 revenue and EBITDA were in-line with our estimates. DPU for 2018 maintained at 6.5 cents, payable quarterly
  • Cable TV customers stable with a pick-up from higher margin broadband subscriber base. ARPU from cable TV disappointed.
  • We maintained our ACCUMULATE rating. Our target price has been tweaked lower to S$0.62 to account for the lower ARPU and higher cash taxes for FY18e.

Results at a glance

1

The Positives

+ Broadband subscriber growth. After remaining flat for the past five quarters, we saw net adds of 2000 subscribers in 4Q17. The improvement was due to more attractive price and broadband speed being offered, such as, 300MBps plan.

 + No change in cable TV rates in 2018. In a recently concluded dialogue with the municipalities, there will be no change in cable TV rates for all five-franchise areas in 2018.

 + DPU and capex guidance for FY18e reaffirmed. DPU for FY18e is 6.5 cents. Capex will decline from S$85mn in FY17 to S$45mn in FY18e.

The Negatives

 Cable TV ARPU softer than expected. ARPU for cable TV had been falling NT$3-4 per quarter for past three quarters. This was due to lower rates from South Taoyuan in early 2017. However, in 4Q17, APTV experienced a much steeper NT$7 drop. This was due to customers taking advantage of discount by pre-paying their three-month bundles.

 Higher corporate tax in Taiwan. Corporate tax in Taiwan will rise from 17% to 20%. This will hurt onshore income in Taiwan. There is no change to withholding tax rates.

Outlook

The outlook remains stable. We lowered our FY18e earnings by 10% due to higher taxes and lower ARPU for cable TV. As we enter 2018, cash flows will improve as capex for premium digital ends.

Maintain ACCUMULATE rating. Target price lowered marginally to S$0.62 (previously  S$0.64)

We moved our target price lower to take into account as our estimates for ARPU fall and corporates taxes increase. We still like APTV for the attractive dividends supported by a recurrent monthly cable TV subscription fees.  

 

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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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