Asian Pay Television Trust (APTT)

90% of the assets are in form of intangible, that's the first thing that turns me off. Also took a quick look at AmFraser report, the borrowings for 2014F, 2015F and 2016F is indeed increasing. This causes me to think if the trust has the ability and intention to maintain its 10% yield for future, another turn off.

The fraser report seems to expect the company to be cash flow positive by next year. I think if they switch to quarterly dividend it would be more transparent because then can tell if dividends will be reduced every three months instead of waiting half a year. The main concern is whether dividend is sustainable given the high debt load, low or negative cash flow and almost zero growth.

With the settlement of tax issue, in accordance to what is expected in the prospectus. One risk down. Now is the growth vs capex risk

http://infopub.sgx.com/FileOpen/SGXAnnou...eID=302900

Thought it is important to repost Boon post on another thread on reit analysis. I dun know how to do transfer of thread...

His quote from IRAS

6.7
"The tax exemption scheme for infrastructure foreign income will expire on 31 Mar 2017 (unless specifically revoked earlier). Accordingly, where the section 13(12) declaration form is submitted to IRAS after 31 Mar 2017, the infrastructure foreign income will not enjoy the tax exemption, unless the scheme is extended."

Section 5 (S-Reits) is meant to align with Section 6 (Qualifying offshore infrastructure project/asset) - With the alignment, does it mean that the tax exemption scheme for S-reits foreign income will also expired on 31 March 2017, unless extended ?

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APTT will fall under this category.

(11-07-2014, 07:13 AM)Greenrookie Wrote: Thought it is important to repost Boon post on another thread on reit analysis. I dun know how to do transfer of thread...

His quote from IRAS

6.7
"The tax exemption scheme for infrastructure foreign income will expire on 31 Mar 2017 (unless specifically revoked earlier). Accordingly, where the section 13(12) declaration form is submitted to IRAS after 31 Mar 2017, the infrastructure foreign income will not enjoy the tax exemption, unless the scheme is extended."

Section 5 (S-Reits) is meant to align with Section 6 (Qualifying offshore infrastructure project/asset) - With the alignment, does it mean that the tax exemption scheme for S-reits foreign income will also expired on 31 March 2017, unless extended ?

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APTT will fall under this category.

it will be interesting it will not be extended. this is probably what seperates local vs hk reits. if you don't have tax advantages would valuation change a fair bit? i would think so

In this long overdue correction, APTT stand out strong, I believed is due to the defensive yield of the counter.

At 85 cents, it still yield almost 10%.

The tax settlement with Taiwan tax bureau is settled within expectation as lied out in the prospectus.

When the tax announcement is made, I made a bid at 77.5 cents but got it at 77. Why is market so pessimistic about it?

1) competition is set to increase
2) growth at Taichung is highly uncertain, since they are unlikely to hit out at Kbro (to prevent retaliation at home turf) so the untapped market is relatively small.

But with the short term spanner gone, dividend at 10% for 2014 is all but assured. With capex within lower limit of my calculation for the next 2 years. 80 million instead of 120 mio, it is also highly unlikely that 2014 will see a drastic fall in distribution.

In the longer run, sustainability of distribution depends on the growth and how well they hold off competition. Will need to scrutinized the churn rate and the ARPU over the next 2 quarters beside subscription numbers.

But with 1.5 years of clear sky, could APTT benefit further with the movement to defensive yield?

It has already risen about 10% without declaring a 4 cents dividends, (they keep their distribution guide of 8.25 cents for 2014 when they announce tax settlement. Could APTT test 90 cents with the coming CD?

Volume is improving too, since the announcement. Finger crossed.

http://www.businesstimes.com.sg/premium/...s-20140813

PUBLISHED AUGUST 13, 2014
APTT to pay H1 DPU of 4.12¢, on track to meet full-year forecasts
BYMICHELLE QUAH
michquah@sph.com.sg @MichelleQuahBT

ASIAN Pay Television Trust (APTT), the first listed pay-TV business trust in the region, yesterday reported interim earnings which it said place it in a good position to achieve the full-year performance it set out in its listing prospectus last year.
It also declared a distribution per unit (DPU) of 4.12 Singapore cents for the half-year ended June 30, 2014, to be paid on Sept 26.
For the quarter ended June 30, 2014, APTT said its total revenue came in at S$79.19 million. Its earnings before interest, taxes, depreciation and amortisation (Ebitda) totalled S$48.39 million, while its asset Ebitda came in at S$51.96 million, for the period.
Asset Ebitda refers to the Ebitda of only APTT's seed asset - the Taiwan Broadband Communications Group (TBC), a leading Taiwan integrated cable operator - and does not include expenses attributable to the trust and offshore entities.

APTT is presently trading at a yield of ~9.2%.

This is based on management's forecasted distribution of 8.25 c in FY 2015.

The distribution in FY 2014 is also expected to be 8.25 c.

I query whether the above distribution and yield is sustainable, both from the perspective of earnings and cash flow.

1. Earning - EPS has for some time exceeded DPS - e.g. in 3Q14, EPS (1.05 c) < DPS (2.0 c).

2. Cash flow - net cash inflow from OPERATING ACTIVITIES in 3Q14 was S$ 14.0 m, but yet distribution for 3Q14 was S$ 28.7 m.

Someone once told me that if something is trading at a 10% yield, it isn't.

I would be grateful if someone can explain why I am wrong.

(31-01-2015, 07:11 PM)buffetlunch Wrote: APTT is presently trading at a yield of ~9.2%.

This is based on management's forecasted distribution of 8.25 c in FY 2015.

The distribution in FY 2014 is also expected to be 8.25 c.

I query whether the above distribution and yield is sustainable, both from the perspective of earnings and cash flow.

1. Earning - EPS has for some time exceeded DPS - e.g. in 3Q14, EPS (1.05 c) < DPS (2.0 c).

2. Cash flow - net cash inflow from OPERATING ACTIVITIES in 3Q14 was S$ 14.0 m, but yet distribution for 3Q14 was S$ 28.7 m.

Someone once told me that if something is trading at a 10% yield, it isn't.

I would be grateful if someone can explain why I am wrong.

I don't have the time to look at the statements, but have you accounted for one time cash outflow? I recall there's a income tax dispute settlement - originally forecast to be settled by 2013, but only settled around mid year 2014. The cash for the payment of the income tax was set aside out of the IPO proceeds I believe.

AM Fraser (or KGI Asia as they are now known) issued an interesting (and negative report) on the company.

http://https://57a3dfa1-a-62cb3a1a-s-sit...edirects=0

Their main thesis is that :

(1) Free cash flow is less than the 8.25 cents dividend paid in 2014 and promised by management in 2015. Hence dividend is being partially financed by borrowings until 2017 ($56 and $31MM respectively for 2015 and 2016) by which time free cash flow covers the dividend

(2) The Taiwanese regulator may introduce more competitive rules forcing the company (and its competitors) to split its subscription packages into smaller and cheaper packages which will result in lower ARPU. These rules have, apparently, been discussed for the past two years and may be decided by 2017 and come into effect by 2019.

(3) Some deferred tax assets may require additional borrowings

(4) There is also some discussion on the competition but I don't think there is anything particularly new.

(5) SImilarly with slowly declining ARPU - I think everyone is aware that this is a sunset industry but it may take a long time to die and should throw off a lot of cash in the meantime.

IMO, I am less concerned about (1) as the company has sufficient bank lines to cover the shortfall. I also am not sure whether the analyst's capex assumptions are on the high side. I was under the impression that capex would be lower once the current expansion into the neighboring territory is finished. I am much more concerned about (2). I don't know whether this report is solely the work of a Singapore based analyst or whether they have drawn on insights of AM Fraser's Taiwanese parent. Looks like any event is at least 2 -3 years away but one to keep an eye on and something that I don't think other research houses have flagged.

Vested