Asian Pay Television Trust

Price targets:

16.5 cents NEUTRAL (Phillip Securities Research)

Mainboard-listed Asian Pay Television Trust (APTT) is a shadow of what it used to be.

From its IPO of 97 cents 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 points to average revenue per user (ARPU) from its cable TV business, which was flat q-o-q after 13 consecutive quarters of decline. APTT also saw a modest rise in broadband revenue q-o-q.

“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% y-o-y drop in broadband ARPU, even as the number of broadband subscribers rose 10% y-o-y in 4QFY2019.

On Feb 11, the group announced 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 Taiwan’s upcoming 5G rollout.

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

NetLink NBN Trust

Price targets:

$1.10 BUY (OCBC Investment Research)

$1.05 BUY (UOB Kay Hian Research)

$1.05 BUY (DBS Group Research)

$1.11 OUTPERFORM (Daiwa Capital Markets)

$1.00 OVERWEIGHT/IN-LINE (Morgan Stanley Research)

$1.09 BUY (HSBC Global Research)

Analysts remain bullish on NetLink NBN Trust, after the fibre network infrastructure operator posted a set of results for 3QFY2020 ended December that was within expectations.

NetLink Trust on Feb 10 reported a 9.6% jump in 3QFY2020 earnings to $21.5 million, as revenue rose 2.9% to $91.6 million on the back of higher residential revenue.

Residential connections revenue climbed 12.8% to $58.7 million in 3QFY2020 – accounting for 64.1% of total group revenue. However, the increase was partially offset by lower installation-related revenue, diversion revenue as well as ducts and manhole service revenue.

Going forward, the group says it remains fully supportive of Singapore’s objectives towards the deployment of 5G infrastructure and growth of the 5G innovation ecosystem.

It adds that it is monitoring the development of the 5G network in Singapore and will explore opportunities associated with the new market development.

“We continue to believe that Singapore’s 5G rollout should be a growth driver for [NetLink Trust’s] Non-Building Address Points (NBAP) connections, as it goes beyond its existing trials with M1 and TPG Telecom,” said OCBC Investment Research in a note on Feb 11.

Meanwhile, UOB Kay Hian lead analyst Chong Lee Len believes the stock offers good earnings visibility and sustainable dividend yield of 5% for FY2020 to FY2021.

“The stock has outperformed the STI by 8% year-to-date and we expect further outperformance as investors seek shelter in high dividend yielding stocks amid external volatility,” Chong says.

The analyst notes that NetLink has a low gearing with gross debt/Ebitda at 2.4 times. Assuming NetLink keeps within the threshold of 4 times for gross debt/Ebitda, Chong estimates that this gives the group sufficient debt headroom of $400 million for FY2020 to finance further expansion.

Chong sees NetLink as a “clear beneficiary” of the 5G rollout on the back of higher connections and higher installation-related revenue. — By Stanislaus Jude Chan

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