Over the past 1 week, I observed that Asian Pay TV Trust ("APTT") dropped below the resistance level of $0.80. It declined to an all time low of $0.775 by end of 1 Nov'13. APPT IPO debut in May'13 at $0.97. Based on the current price, it represents a shocking plunge of approximately $0.20 drop per unit or 20% decline in its market value within half a year. Another peculiar point is that the Sep'13 results will only be announced on 12th Nov'13....but there were sudden sell off by current investors. Is it insider trading and the results from APPT is going to be a major disappointment?
Well, my own analysis is that APTT is a very much misunderstood stock. The market is pricing risk and reward at 10.6% yield based on $0.775 per unit.....this is crazy. I have been holding on to APTT since its Macquarie International Infrastructure Funds days which was 5 years ago. APTT had performed magnificently in terms of capital growth and dividend income (I entered into the market during the Global Financial Crisis in 2008).....for me, this has always been an excellent cash cow and I believe it will continue its stellar performance for the following reasons:
(1) There is no major change in the management of APTT. It is a team which has a consistent track record of delivering results and executing strategic plans in business development in Taiwan.
(2) Potential competitors will have a tough time competing with APTT which already has the basic infrastructures in place. It will be tough for any competitors to try to sustain operations till they achieved the same economy of scale.
(3) Content on offer by Taiwan Broadband Communications such as HBO, National Geographic, Discovery Channel etc. are solid. There are over 105 TV channels in the basic package alone. Internet download of programs are currently still somewhat lacking in content. I foresee consumers still onto paid TV for many many years. Anyway, if technology and lifestyle change, there will still be ample time to get out before it truly became a sunset industry.
(4) My valuation using the discounted dividend model arrived at close to $1 per unit. Also, net asset per unit is around $0.92. Hence based on current pricing, there is a significant margin of safety in mopping up more shares in APTT. Over the past few days, I have acquired another 10,000 units, taking advantage of the declining pricing.
(5) The cash flow is sustainable bearing any major mishap. APTT management has reduced leverage significantly over the years. They have learnt many invaluable lessons during the last 2008 recession. 10.6% yield means one will be able to recoup one's investment in less than 10 years. The current yield is very much worth the risk taking.
Of course, the main concern will be whether APTT can get their broadcast license renewed in another 5 years. Based on what APTT has built up, this should not be a major hurdle.
The financial results to be announced soon will indicate whether my analysis are on the right track. As the saying goes, no risk no gain.
