Asian Pay Television Trust (APTT)

[buffetlunch]

No intention to confuse, and apologies if that has been the case.

However I would like to know: what is the statement I made that is confusing?

[DCF]

It's your money, but don't confuse people. Dividends are paid out of free cash flow from operations less interest, taxes and expenses. This is similar to REITs and other business trusts. There's nothing special in this sense about APTT and only Rickmers Maritime (for good reason) pays a higher dividend yield.

There is, of course, no free lunch. The higher dividend takes into account the need to rebuild capital later down the road.

Not only Rickmers Maritime, UMS pay even better dividend

[Shrivathsa]

Interesting report from a young chap

http://www.nextinsight.net/index.php/sto...-with-sell

This report was quite correct and he nailed it on the head with a target price which is reached today, around 8 months after his call.

[Nick]

The current yield exceeds 11% though its ability to generate sufficient FCF to maintain this level of distributions in the future needs to be ascertained by any prospective investor.

(Not Vested)

[weijian]

The current yield exceeds 11% though its ability to generate sufficient FCF to maintain this level of distributions in the future needs to be ascertained by any prospective investor.

(Not Vested)

These are yield numbers we will only find in a crisis. Without the presence of one, the only alternative scenario is that Mr not-so-efficient-but-also-not-stupid Market has priced in a high certainty of a reduction in future distributions.

This is not the first time that the Macquire bankers had tried to borrow their way to fund unsustainable payouts from TBC. IIRC, it had earlier tried the same trick when TBC was embedded in MIIF a couple of years back.

[frus]

My 2 cents on sustainability of payouts at APTT:

in the 9 months to Sep-2015, the company generated 105m of operating cashflow (Net cash inflows from operating activities), CAPEX (Net cash used in investing activities) was 58m and distributions were 88m. So a there was a shortfall of 41m (105-58-88) over the first 9 months. There was a similar situation in 2014: operating CF did not cover Capex+Divs.

It's a nice business, but has too much debt.

Not vested (any more)

[tanjm]

My 2 cents on sustainability of payouts at APTT:

in the 9 months to Sep-2015, the company generated 105m of operating cashflow (Net cash inflows from operating activities), CAPEX (Net cash used in investing activities) was 58m and distributions were 88m. So a there was a shortfall of 41m (105-58-88) over the first 9 months. There was a similar situation in 2014: operating CF did not cover Capex+Divs.

It's a nice business, but has too much debt.

Not vested (any more)

Actually if you want to talk about "sustainability of payouts", you need to differentiate between maintainance capex and new business (growth) capex. This is, unfortunately not clearly broken down in the report. Nevertheless you left out a key distinction.

However, pg 10 of the financial statements explicitly says that maintenance capex is paid out of operating cashflows and only new business capex is paid out of debt. 

I would be interested in looking at what their actual maintenence capex is like.

[tanjm]

My 2 cents on sustainability of payouts at APTT:

in the 9 months to Sep-2015, the company generated 105m of operating cashflow (Net cash inflows from operating activities), CAPEX (Net cash used in investing activities) was 58m and distributions were 88m. So a there was a shortfall of 41m (105-58-88) over the first 9 months. There was a similar situation in 2014: operating CF did not cover Capex+Divs.

It's a nice business, but has too much debt.

Not vested (any more)

Actually if you want to talk about "sustainability of payouts", you need to differentiate between maintainance capex and new business (growth) capex. This is, unfortunately not clearly broken down in the report. Nevertheless you left out a key distinction.

However, pg 10 of the financial statements explicitly says that maintenance capex is paid out of operating cashflows and only new business capex is paid out of debt. 

I would be interested in looking at what their actual maintenence capex is like.

Some approximation of the answer here. In their IPO prospectus, their forecast maintenance capex for 2014 was 13.5m. Let's assume 15m for 9 months of 2015. Then 15m + 88m = 103m. 

This is, not coincidently, about the sum of their operating cashflow and is thus consistent with the page 10 statement in the last financial report.

[tanjm]

Having said this, this doesn't mean APTT doesn't have significant capex to maintain their infrastructure every several years. You simply can't tell this from the simple capex in the financial report.

If you assume their depreciation policy is in line with the true life of their equipment and infrastructure, then you can estimate that the annual depreciation is approximately equal to the amortization of their lumpy renewal capex. Their annual depreciation is about 40m. So on a virtual basis, you can assume that about 35% of the yield you receive has to be set aside for a future cash call. i.e. out of 8.25 cents, assume that 5.3 cents is free and clear. This is not coincidentally the claim of that AM Fraser fella, except that he chose to sensationalize it and perhaps disguise his calculation.

Remember 1+1 = 2, and 8-6 can also equal 2. A 75 cent "target price" is by itself meaningless.

Is a 5.3 cent dividend divided by 75 cents = 7% a good yield for a stable, low growth asset with relatively small business risks? In my opinion yes - even after accounting for FX risk. is a $1 dollar share price still a ok price? Probably not.

[Nick]

SGX has issued a trading query to APTT. The stock is down 5.9% and trading at 64.0 cents.

(Not Vested)