DBS Vickers 2015-08-04: Asian Pay Television Trust - 2Q15 Results. Network expansion on track. Maintain HOLD.

Network expansion on track 

  • 2Q15 EBITDA of S$ 50.4m (+4% y-o-y and q-o-q) and 2Q15 DPU of 2.00 Scts were in line. 
  • Revenue helped by forex movements. 
  • Higher finance cost dragged profitability. 
  • Maintain HOLD on revised TP of S$ 0.87. 


Forex helped top line. 

  • 2Q15 revenue of S$ 82.7m (+4% y-o-y, flat q-o-q) was in line with our expectations. 
  • Favourable foreign exchange movements helped revenues while premium cable ARPU showed signs of stabilising after decreasing for several quarters. 
  • However, basic cable sub base remained stagnant. 

Profitability tempered by finance costs. 

  • Lower broadcast and production costs and one-time fees relating to debt restructuring helped to improve EBITDA margins q-o-q. 
  • This was however tempered due by higher staff costs and a one-off fee of $1.2m relating to a settlement of a tax dispute. 
  • Higher finance costs due to higher borrowings offset foreign exchange and derivative related gains. 


Network expansion on track. 

  • Marketing operations in the new coverage areas have commenced. 
  • APTT has already covered over 30% of the new coverage area and plans to complete the expansion in early 2016. 
  • APTT is expected to incur further capex of S$30-40m over FY15 and FY16 for network expansion, in line with our expectations. 

Sufficient debt facilities for growth capex. 

  • APTT refinanced its existing debt in 1Q15 with a new 7-year borrowing facility of c.S$ 1.4bn. 
  • This leaves c. S$ 200m available for borrowing which should comfortably cover capex over the next two years. 


  • Maintain HOLD with DCF-based TP of $0.87 (WACC 7.2%, terminal growth 0%) as we roll forward our valuations and temper our growth assumptions for basic and digital cable TV due to potential threat from over-the-top (OTT) content in the long term. (prev S$0.90)
  • However, the counter does offer an attractive yield of ~9%. 


Potential regulatory policy changes could affect ARPU, revenue. 

  • Regulatory policy changes which could allow customers to choose channel bundles at a lower price could erode ARPU and revenue for APTT as c. 80% of revenues stem from basic cable. 
  • However, the management is of the view that the new policy is unlikely to come into effect due to the lack of support from the industry. 

Competition and weaker economy could stifle network expansion. 

  • The total addressable market in the new coverage areas exceeds 400k homes. APTT is targeting to penetrate at least 35% of households over the next 5 years. 
  • However, stronger competition and a weaker economy could dampen efforts to gain market share. Sharp depreciation of Taiwan dollar or sharp rise in interest rates. 
  • APTT hedges only part of its currency and interest rate risks, suggesting there is still an element of risk.

Analyst: Sachin MITTAL

Source: http://www.dbsvickers.com/