SINGAPORE (May 17): Asian Pay Television Trust (APTT) on May 14 announced that an ordinary interim distribution of 1.625 cents per unit in 1Q18, which remained consistent compared to 1Q17.
Revenue for the quarter was 6.8% lower at $77.0 million from $82.6 million a year ago, negatively affected by weaker selling prices from TV prepaid packages and a significant drop in non-subscription revenue sourced from TV channel leasing.
With total operating expenses dropping 6.4% y-o-y to $31.5 million, EBITDA came in 7.0% lower y-o-y at $45.5 million.
On the outlook, the trust says that it will continue to build on initiatives to up-sell and cross-sell services across Taiwan Broadband Communications Group’s (TBC Group) subscriber base to drive growth in future cash flows.
TBC is Taiwan-based cable television operator that is part of the trust’s portfolio.
And to navigate the competitive market environment, especially with mobile operators offering unlimited wireless data, the trust will continue to focus on Broadband revenue generating units (RGU) growth by offering discounted packages in order to acquire new RGUs from competitors and to retain existing RGUs.
Following the results announcement, Phillip Capital is upgrading its recommendation on APTT to “buy” with a target price of 52 cents, triggered by a drop in share price.
In 1Q18, the trust managed to lower content cost (or broadcast cost) by negotiating directly with the content provider and avoiding agents.
However, apart from lower revenue, the trust’s subscribers declined by 1,000 this quarter after holding steady at 762,000 for the past five quarters.
In a Wednesday report, analyst Paul Chew says, “Whilst not alarming, this is the first decline since listing. Important that this decline does not become a trend. This will imply cable TV services are no longer a utility-type service and there is another form of substitute available.’
In addition, ordinary capex unexpectedly more than doubled in 1Q18, due to the trust aiming to extend its fibre connection to the home as it offers faster 500MBps broadband services.
“We are concerned. Cable TV is a product with hardly any pricing power. It will be a challenge for APTV to raise pricing. The fall in subscribers is a lesser concern now, as the decline was marginal,” says Chew.
Nonetheless, the stock is trading at an attractive FY18 dividend yield of 14.0%, but capital appreciation will be challenged until there are more stability in revenues.
As at 11.45am, units in APTT are trading 1 cent higher at 48 cents or 0.6 times FY18 book.
