Asian Pay TV Trust ("APTT") used to be the market darling for income investing investors which pays over 8% in dividend yield from IPO. However, APTT has since dropped from its IPO price of S$0.97 (in 2013) per unit to the current S$0.116 per unit as at 19 August 2022. This is a whopping 88% plunge in market valuation for investors did not bail out and are still holding on to APTT. In short, the high dividends then were not sustainable. I have made close to 46% return from capital gain and dividends back in its more glorious days under the Macquarie Infrastructure Fund. But have since lost most of it after accumulating new units from the IPO spin off. I even accumulated more units when its price drop after IPO. But eventually, I was forced to cut loss and sell off at various prices ranging from S$0.60 to S$0.80 due to its worsening cashflow position and declining earnings. But I count myself fortunate that I sold off the bulk of the holdings before its price collapsed further from May 2018 onwards.
1. Is APTT at S$0.116 per unit and 8.5% distribution yield now a STAR buy?
The previous strategy of APPT senior management is to use borrowings to finance CAPEX. This means that its free cashflow actually cannot finance the dividends paid out with massive debt incurred. At one point, the debt issue will explode in particularly if the underlying business decline and can no longer generate sufficient cashflow. Due to its current low price and current free cashflow of up to S$80Mil, the question is whether it is a good to time to accumulate units of APTT now.
2. Current high gearing ratio despite cutting dividends by 80% since 2018 and 2020 rights issue to repay colossal debt of over S$1.4 billion.
In 2018, borrowings of APTT was at round S$1.4 billion. As at 30 June 2022, its borrowings is still at approximately S$1.4 billion despite cutting dividends by 80% in Nov 2018 and launching a rights issue in 2020. It looks like APPT network CAPEX over the years have been rather intensive. Its current gearing ratio stands at an eye popping 48.8% notwithstanding cutting dividends by 80% in 2018 and rights issue in 2020 to cut down on bank borrowings.
3. Broadband is growing with 5G adoption but Cable TV decline remains worrying
Broadband is growing as APTT partnered with mobile operators to drive fixed-line broadband segment and higher speed plans. However basic cable TV remains in doldrums. For its half year revenue, Cable TV makes up 74% of its overall revenue which implies that it remains an extremely heavily weighted segment in terms of the business performance of APTT. Hence any upsides contribution from its Broadband segment will still be outweighed by the declining basic cable TV segment.
Parting thoughts
As alluded to the above points, I am rather surprised that an analyst from Phillip Capital recently upgraded APTT to "buy" due to recent share price weakness and has a target price of S$0.150 per unit. Personally, I will still be staying far away from APTT. Its core cable TV business is a sunset business segment in view of intense competition from IPTV service providers that will continue to wilt away its core earnings.
No comments:
Post a Comment