APTT: Tuning in to an alluring yield play
Asian Pay Television Trust (APTT) is down 8.8% from its IPO price of S$0.97, and now trades at a projected 10% yield. At current valuations, we believe that investors have overpriced in their concerns surrounding APTT’s business risks. As reflected in our projections, we are confident about the sustainability of APTT’s distribution yield on the back of its stable Basic Cable TV growth, digitization initiatives and continued market share gains in the broadband market.
Consumer dynamics working in TBC’s favor. Youthful demographics, higher-than-average income levels and strong population growth are the key characteristics of TBC’s franchise markets. These favorable dynamics will continue to prop up TBC’s headline growth going forward.
Reaping the scalable benefits. Already, TBC boasts very compelling EBITDA margins and we project a further expansion of its margins as it leverages on its existing infrastructure and subscriber base to pursue growth across all three segments. This will generate substantial economies of scale for TBC.
Revving up the Premium Digital Cable TV and Broadband engines. Among TBC’s business segments, the most exciting opportunities are in Premium Digital Cable TV and Broadband, with continued stable growth from Basic Cable TV supporting TBC’s overall growth. By engaging in initiatives such as the distribution of free digital set-top boxes and the bundling of its services together, TBC certainly looks poised to capture the growth opportunities on offer.
Initiate BUY with FV S$1.04. We initiate coverage on APTT with a BUY recommendation and a DDM-derived target price of S$1.04. This gives us a potential capital appreciation of 18.2%, in addition to a projected 10% yield. At our fair value of S$1.04, this gives us an implied yield of 8.5%. We project that a semi-annual DPU of 4.6 cents would be payable in Sep/Oct 2013, followed by a subsequent 4.2 cents in Mar/Apr 2014.
Publish date: 31/07/13