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Better-than-expected 4Q, potential 5G tie-up in Taiwan could signal better times ahead for APTT: Phillip Securities

Stanislaus Jude Chan
Stanislaus Jude Chan • 3 min read
Better-than-expected 4Q, potential 5G tie-up in Taiwan could signal better times ahead for APTT: Phillip Securities
Market watchers believe there are some positive signs that APTT could be flickering back to life.
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SINGAPORE (Feb 12): Mainboard-listed Asian Pay Television Trust (APTT) is a shadow of what it used to be.

From its initial public offering price of 97 cents back in 2013, the Singapore-based business trust traded below 20 cents for the whole of last year. The counter closed at 16.7 cents on Feb 11, giving it a total market capitalisation of around just $241.3 million.

But market watchers believe there are some positive signs that APTT could be flickering back to life.

“Some stability [is] creeping in,” says Paul Chew, head of research at Phillip Securities Research.

APTT saw its total revenue slide 6.5% to $74.3 million for 4QFY2019 ended December, on the back of declines across all three segments.

Revenue from the group’s basic cable TV segment fell 7.6% to $59.1 million during the quarter, while broadband revenue dipped 1.5%to $12.0 million and premium digital cable TV revenue was down 5.0% to $3.2 million.

This brought full year revenue for FY2019 to $292.6 million, some 6.8% lower than FY2018 revenue of $313.9 million.

4QFY2019 EBITDA fell 2.4% to $42.9 million, despite a 2.4 percentage point improvement in EBITDA margin to 57.8%.

“4QFY2019 revenue and EBITDA were around 5% better than our expectations,” says Chew.

In particular, the analyst pointed to average revenue per user (ARPU) from its cable TV business, which was flat quarter-on-quarter after 13 consecutive quarters of decline. Quarter-on-quarter, APTT also saw a modest rise in broadband revenue.

“We were surprised by the stability in certain operational data,” Chew says. “Cable TV ARPU finally stopped sliding albeit subscribers are still contracting... at a rate of around 5,000 per quarter.”

“Broadband subscribers responded well to the lower prices offered, which helped to keep revenues stable,” he adds. Chew notes that the pricing strategy resulted in a 12% year-on-year drop in broadband ARPU, even as the number of broadband subscribers rose 10% year-on-year in 4QFY2019.

The trustee-manager also declared distribution of 0.30 cent per unit for 4QFY2019, unchanged from a year ago. The board has also reaffirmed its distribution guidance of 1.20 cents per unit for FY2020, which works out to a quarterly distribution of 0.30 cent per unit per quarter.

Meanwhile, the group announced on Feb 11 that Taiwanese firm Da Da Digital Convergence Co is eyeing the acquisition of a 65% stake in Dynami Vision – the sole shareholder of APTT’s trustee-manager.

Da Da Digital is controlled by industry veteran Dai Yung Huei, who is the founder of Taiwan-listed cable television systems and broadband services provider Dafeng TV.

The deal is expected to open doors for APTT to tap into Taiwan’s upcoming 5G rollout.

“In view of the industry changes in the 5G era, there is potential to create synergies with APTT,” Dai said in a statement. “Clearly, there are opportunities for both parties to collaborate and cover each major metropolitan area in Taiwan.”

See: Gear Rise to sell 65% stake in APTT’s trustee-manager for undisclosed sum

“APTT has guided that data backhaul services offered to Taiwanese mobile operators will materialise when 5G services are rolled out. [However,] at present, there are limited data points for us to model this market opportunity,” Chew says.

Phillip Securities is keeping its “neutral” rating on APPT with an unchanged target price of 16.5 cents, pegged at around 10 times EV/EBITDA.

“This is a 10% valuation discount to its much larger Taiwanese peer,” Chew says. We look for further signs of revenue or EBITDA to stabilise before any re-rating and valuation discount to peers to be even narrower.”

As at 4.50pm, units in APTT are trading 1.2% up or 0.2 cent higher at 16.9 cents.

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