Asian Pay Television Trust - Phillip Securities 2019-11-12: Running But At The Same Spot For Now


Asian Pay Television Trust - Running But At The Same Spot For Now

  • ASIAN PAY TELEVISION TRUST (SGX:S7OU)'s 3Q19 revenue was in line, but EBITDA was marginally below our estimates. Expenses such as content and staff cost were higher than modelled. See Asian Pay TV Trust Announcements.
  • Broadband reported record net additions of 9,000 subscribers in 3Q19. But revenue was still down 5% due to weaker ARPU .
  • Falling revenue is still the biggest challenge. We estimate revenues will fall S$9mn in FY20e (FY19e down S$25mn). The annual dividend pay-out of S$17.4mn per annum is well funded by adjusted FCF of $46m. Nevertheless, it will be challenging for the stock to outperform until investors get some visibility of revenue stabilising.
  • We believe the rollout of data backhaul services for 5G in 2021 will be the opportunity for revenue to stabilise or even grow. We peg Asian Pay Television Trust at around 9.5x EV/EBITDA. This is a 20% discount (previously 15%) to their much larger Taiwanese peer valuations. We maintain NEUTRAL and keep our target price unchanged at S$0.165.

The Positives

Record additions in broadband subscribers.

  • Broadband subscribers rose by 9,000 to 232,000 in 3Q19. A post-IPO high. Nevertheless, revenue still declined due to an 11.5% y-o-y contraction in ARPU.

Content cost re-contracting helps.

  • Most of the operating cost for Asian Pay Television Trust is relatively stable. A lever to offset falling revenue has been content cost. The content cost has been renegotiated lower since last quarter.

The Negatives

Core cable TV subscribers still dropping.

  • Subscribers have been declining since 1Q18 and lowering prices had little impact on stemming this declining. A positive is that ARPU contracted NT$2 per quarter this year, compared to NT$5 per quarter in FY18.

Capex sticky and not helping revenue.

  • Asian Pay Television Trust is investing upfront in deploying more fibre into their network. So far there has not been a significant return on this investment, judging by the lacklustre rise in broadband revenue. The bulk of the returns on this investment should materialise when Asian Pay Television Trust sells data backhaul service to 5G mobile operators in Taiwan.


  • We believe FY20e will follow similar trends of weak revenue, EBITDA and subscribers. The headwinds facing cable TV such as video piracy, IPTV competition and lower regional pricing is unlikely to tapper down anytime soon.
  • A positive next year should come from capital expenditure where management expects to trend downwards from FY20e. The improvement in FCF can be deployed to pare down debt.

Maintained NEUTRAL and target price unchanged at S$0.165

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2019-11-12
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 0.165 SAME 0.165