PhillipCapital is maintaining its “buy” call and target price of 15 cents on television services provider Asian Pay Television Trust (APTT).
This is expected to give the counter a total return of 36.8% from its 11.7 cent price on Nov 13, says analyst Paul Chew in a note.
“Our buy remains premised on a yield of 8.5% and sustainable operating cash flows,” he elaborates.
His comments follow the counter’s recent earnings for 3Q2020 ended September in which it declared an ordinary distribution per unit (DPU) of 0.25 cents, down 16.7% if the 0.3 cent DPU disbursed in the year earlier ago period.
This comes as its net profit plunged by 12.9% to $4.5 million in 3Q2020, from the previous year’s $5.1 million due to higher expenses incurred.
In this time, its revenue edged up by 4% to $75.9 million thanks to a steady increase in its subscribers for its premium digital cable TV and broadband services across the past quarters.
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In the most recent 3Q2020, APTT added about 10,000 premium digital cable TV subscribers and 2,000 broadband subscribers, which compensated for the 5,000 dip in its basic cable TV users, the company noted in its results filing.
The softening in demand for cable TV, which follows piracy concerns and the competitive pricing of Internet Protocol television (IPTV), says Chew.
Still, total subscriber base stands at 1.19 million, up 2% year-on-year.
“3Q2020 revenue and EBITDA were within our expectations at 76%/78% of our FY20e forecasts,” says Chew. He notes that the counter’s DPS will be maintained at 0.25 cents/quarter in FY21.
“Operationally, we are incorporating lower revenue and EBITDA for FY21e, to factor in lower cable TV revenue. However, Free Cash Flow should rise with lower capital expenses”.
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The reduced capex amounts to some $10 million and comes amid a slowdown in the hefty investments made to improve fibre capacity.
“These investments were made to raise the bandwidth of its broadband offerings and in preparation for its 5G data backhaul business from mobile operators,” explains Chew.
He reckons this will be an opportunity and a key component of its broadband business in the next few years.
As at 3.55pm, units in APTT were trading at 11.9 cents, up 0.1 cents or 0.85%.
