Asian Pay Television Trust (APTT)

[touzi]

APTT has an investor update on 18 Apr and the AGM is on 25 Apr. As I might not be able to attend the AGM (undecided between this and Penguin which is on same day), I am thinking of attending the Investor Update. Anybody has attended such an event before? Is it similar to the AGM where investors are allowed to ask questions on the business and the AR? Thanks.

[weijian]

APTT has an investor update on 18 Apr and the AGM is on 25 Apr. As I might not be able to attend the AGM (undecided between this and Penguin which is on same day), I am thinking of attending the Investor Update. Anybody has attended such an event before? Is it similar to the AGM where investors are allowed to ask questions on the business and the AR? Thanks.

hi touzi,
I am not APTT investor and have not attended their Investor Update before. But this Investor Update sounds suspiciously close to their pre-APTT (MIIF) days and i had attended those MIIF ones before. If the current sessions are the same as MIIF days, i believe you have the prerogative to ask company related questions. I would see the business update as a subset of the AGM but maybe more focused on understanding the business itself, since it doesn't have to allocate time to do all the resolution/voting stuff.

You can also compare the Investor update slides and AGM slides for FY17 as below:
Investor Update on 3/27: http://infopub.sgx.com/FileOpen/Investor...eID=494564
AGM on 4/27: http://infopub.sgx.com/FileOpen/APTTAGM2...eID=501630

[touzi]

Thanks! Glad to know that.

[cyclone]

APTT Announces Launch of Strategic Review

Asian Pay Television Trust (“APTT” or the “Trust”) today announces that it is undertaking an independent strategic review of options available for APTT and its investment in Taiwan Broadband Communications Group ("TBC").

The Trustee-Manager of APTT has established a special committee, consisting of four independent directors and the Chief Executive Officer, to oversee the strategic review.

The Trustee-Manager is in the process of selecting an independent financial adviser to assist with the strategic review and expects to make an appointment in the near future.

There is no assurance that any transaction for APTT or TBC will materialise from the strategic review. The Trustee-Manager will make appropriate announcements in the event of any material developments.

[karlmarx]

APTT is but one of the numerous sufferers in the TV business. Thailand's Nation Broadcasting Corporation -- in spite of being in a market of growing population -- has been losing serious money for the past 2 years. Although Nation is not a big player in its market, its poor performance in recent years is probably a sign of changing media consumption behaviour, across the globe.

As APTT is also facing large debt obligations, I am less than optimistic about its prospects.


1) APTT's FY18 operating profit was $107m. Assuming that the new owner paid down the debts -- which will eliminate about $79m of interest charges and financing fees -- and assuming that the tax paid is $20m, APTT's PAT will be about $90m.

Assuming that APTT will be able to earn at least PAT of $90m in the near future -- and the migration from (paid) TV to the free smorgasbord of mobile content is a powerful threat to its business -- how much will a potential buyer be willing to offer to acquire APTT?

Since APTT has $1.5b of debts, the acquirer will have to at least be ready to fork out $1.5b, to say nothing about shareholders. APTT's equity is currently trading at about $250m. So if the acquirer wants to make an offer that is at least on par with market price, the figure may be around $1.75b. Assuming this is the price offered, APTT will be valued at a P/E of 19.

Does it make sense to acquire an asset -- which in most scenarios will likely continue to face strong competitive pressures -- at a P/E of 19?


2) But even if no offer is made, surely the dividends of $17m -- promised by management for FY19 and FY20 -- makes APTT an attractive investment at $250m (or 18 cents per share), given the 6.8% dividend yield?

I'm not sure why management think they can distribute $17m for the next 2 years, when its latest PAT is only $7m. Why not cut dividend to $7m instead? Maybe they foresee lower capital expenditures. Maybe content production budgets will be slashed, and staff retrenched. Maybe there will be changes to the depreciation policy. Maybe they are anticipating certain events to boost their bottom line. Or maybe, it is intended a to buy time for management; delaying an inevitable catastrophe. 

If that is the case, would you -- as the owner of a poor quality asset -- not want it off your hands, ASAP?

If this is the motivation of the 'strategic review,' should an investor be holding a large portion of his portfolio in APTT, if any at all?

Are the moves to 'cut dividend,' and initiate a 'strategic review,' concerted plans to privatise APTT cheaply? Or are they made out of desperation? Perhaps there is pressure from Temasek, the largest shareholder?


3) As an aside, it is perhaps not surprising -- given APTT's present state of affairs -- that the sponsor/TM does not even own more than 5% of the trust. There has also been an increase in the number of shareholders, from 8,214 in FY13 to 12,310 in FY18; the 20 largest shareholders/nominee accounts went from owning 80% in FY13 to 51% in FY18. While institutional money managers are often mocked for not being able to generate higher than average market returns, they seem smart enough not to lose their pants due to over-concentration in a poor quality stock.


https://www.nbc.co.th/download/NBC_annua...017-EN.pdf
https://www.businesstimes.com.sg/compani...ls-options

[touzi]

I'm not sure why management think they can distribute $17m for the next 2 years, when its latest PAT is only $7m. Why not cut dividend to $7m instead? Maybe they foresee lower capital expenditures. Maybe content production budgets will be slashed, and staff retrenched. Maybe there will be changes to the depreciation policy. Maybe they are anticipating certain events to boost their bottom line. Or maybe, it is intended a to buy time for management; delaying an inevitable catastrophe. 

Indeed the management is expecting capital expenses to go down after 2019. This is in the AR and reiterated by the CEO during the investor update. The saving from dividend reduction is 76Mil each year and this should be sufficient to cover the capital expenses for the next 2 year.

[karlmarx]

I thought another reason may be the reduced interest & financing expenses. APTT's dividend cut was probably one of the terms which its creditors demanded in return.

http://infopub.sgx.com/FileOpen/APTTRefi...eID=535316

Creditors must be feeling jittery over APPT's ability to make good on its debt. Could the strategic review be initiated by them, since the largest shareholder owns not more than 8% of the units?

In any case, there is a need to arrest the falling revenue -- the failure of which will put into question the longer-term ability of TBC to operate as a going concern -- which I'm not sure if management is able to.

Perhaps potential buyers may be more interested in TBC's broadband assets -- which is likely to have more durable consumer demand -- rather than its content production/distribution business.

If the broadband assets are sold to settle the creditor's jitters, APTT unitholders will be left with the content production/distribution business. The consumer demand of this segment is likely to be from the older demographic -- with little new converts from the so-called millennials -- which is decreasing by the day.

[davidoh]

ASIAN PAY TELEVISION TRUST (SGX:S7OU)

Price

The issue price (“Issue Price”) of each Rights Unit will be S$0.128, payable in full upon acceptance and application.

Discount (specifying benchmarks and periods)

The Issue Price represents a discount of:

(a) approximately 3.8 per cent. to the closing price of S$0.133 per unit in APTT (“Unit”) on the Singapore Exchange Securities Trading Limited (the “SGX-ST”) on 27 April 2020, being the last trading date immediately prior to the date of the announcement of the Rights Issue;

(b) approximately 3.0 per cent. to the theoretical ex-rights price of S$0.132 per Unit (being the theoretical market price of each Unit assuming the completion of the Rights Issue, and which is calculated based on the closing price of S$0.133 per Unit on the SGX-ST on 27 April 2020, being the last trading date immediately prior to the date of the announcement of the Rights Issue, and the total number of Units following the completion of the Rights Issue); and

© approximately 15.2 per cent. to the six-month VWAP price of S$0.151 per Unit, calculated as the volume weighted average price of all trades on the SGX-ST for the six month period ending on 27 April 2020, being the last trading date immediately prior to the date of the announcement of the Rights Issue.

The Issue Price and the discount have been determined by the Directors after taking into account precedent transactions, the transaction size and discussions with the Lead Manager (as defined herein).

[hh488]

ASIAN PAY TELEVISION TRUST (SGX:S7OU)

Price

The issue price (“Issue Price”) of each Rights Unit will be S$0.128, payable in full upon acceptance and application.

How come it's trading below the right issue price?

Might as well get it from the market.  Who will want to subscribe for it?

[weijian]

Much has been said about APTT's debt levels, but little about the business. So it would be apt to take a peek again.

APTT recently gave a 9M23 update and since it is providing cable TV/broadband, it is similar to utilities and there is little seasonality. So the assumption is that it would be ok to check out its business over the years based on 9M-only comparison.

Revenue:
9M23: 201,001 (-7.2%)
9M22: 216,539 (-3.1%)
9M21: 223,500 (-3.2%)
9M20: 230,863 (+5.7%)
9M19: 218,365 (-6.8%)
9M18: 234,401 (-6.3%)
9M17: 250,130 (+6.3%)
9M16: 235,315

- Besides a temporary boast from Covid-19 in FY20, APTT's business is on a slow but sure decline. The company used to say that its broadband business is growing and it is true - high single digit to low teen figures annually. But unfortunately, broadband only accounts for about a fifth of revenue.
- The mainstay of its business, cable TV revenue has been bleeding annually at mid-low single digits and the decline may be accelerating post covid. Covid-19 locked up many people at home and allowed it to capture some business temporarily but at the same time, permanently changed customer habits as more people also get exposed to other entertainment sources like SVOD and UGC (Youtube, Tiktok).
- With its "utility-like" business getting worst year by year, only a matter of time before it changes its dividend committment again.

APTT 9M23 update (slide10): https://links.sgx.com/FileOpen/APTTPrese...eID=778180