Asian Pay Television Trust:
BUY S$0.77 STI: 3,180.25
Price Target: 12-Month S$0.91 (Prev S$0.97)
Expansion plans confirmed;
•9M13 asset EBITDA of S$150.3m was in line and comprised 75.0% of its FY13F guidance
•APTT confirms plans for expansion into Greater Taichung area; but didn’t give details citing competitive reasons
•We lower our TP to S$0.91, assuming additional capex of S$80-100m in the long term. BUY for ~10.7% yield - highest among business trusts listed in Singapore & HK
Reaffirmed 2H13F & FY14F distribution guidance. 9M13 revenue of S$310.8m comprised 74.9% of FY13F guidance, where broadband revenue was lower than guidance (71.8% of full year), but compensated by higher Basic Cable TV and Digital Cable TV revenues. Broadband was impacted by slower-than-expected economic recovery and a more disruptive typhoon season in 3Q13, resulting in lower-than-expected ARPU and subscribers. The Trustee-Manager reaffirmed the distribution guidance of 4.13 Scts for 2H13F and 8.25 Scts for FY14F.
Offers 30% potential returns on revised TP. We think TBC should be able to offset the loss of EBITDA in existing Taichung City with EBITDA gains in new adjoining areas. However, we estimate that TBC may have to deploy an additional capex of ~US$80-100m in the long term on (i) Scaling up its Digital Head-ends, (ii) Providing free digital set-top boxes, and (iii) Network expansion. Assuming that TBC spends an additional S$15m capex annually from FY15F-20F versus our previous projections, our DCF-based (WACC 7.2%, terminal growth 0%) TP drops to S$0.91. Management has guided that expansion will be distribution accretive in the medium term. With capex revolver in place, TBC can borrow S$22m-25m annually (~1.5 Scts per unit) beyond FY15F for higher capex without impacting its distributions, in our view.
Publish date: 13/11/13