What is APTT?
·
Similar to
Starhub Cable TV & Broadband. APTT is the first listed business trust
in Asia focused on pay-TV businesses. Basically,
they are akin to your Starhub Cable TV and broadband player.
How much are they raising and what
is the use of proceed?
·
APTT will be raising approximately S$1.4billion
of equity proceed and the usage will be used as follow:
From Company's Prospectus
What is its mandate?
·
Distribute 100% of its Distributable Free Cash Flow. APTT intends to distribute 100% of
its Distributable Free Cash Flows. It will seek to acquire controlling
interests and to own. operate and maintain mature, cash generative Pay-TV and
Broadband business in Taiwan, HK, Japan and Singapore.
·
Target 7.51% in FY13 and 8.51% in FY14. Base on the prospectus projection,
they are targeting a 7.51% yield for FY13 and 8.51% yield for FY14.
From Company's Prospectus
What is
its structure?
·
Retain 100%
of its economic interest despite its complicated structure. According to
the prospectus, APTT retains 100% of its economic interest despite its
complicated structure.
From Company's Prospectus
Tell me
more of its business profile?
·
3rd largest
cable TV operator. APTT currently owns Taiwan Broadband
Communications Group (TBC) which is Taiwan's 3rd largest cable TV
operator and has been owned and managed by Macquarie Group (Sponsor) since
2006.
·
Sole licensed provider of cable TV services in 5 closely
clustered franchise areas in Taiwan. APTT is the sole
licensed provider of cable TV services in 5 closely clustered franchise in
Taiwan, namely South Taoyuan, Hsinchu County, North Miaoli, South Miaoli and
Taichung City.
From Company's Prospectus
·
Robust macro-economic
dynamics in the TBC Group’s franchise areas. According to the prospectus, household
growth and disposable income growth are stronger in the regions where APTT’s
five franchise areas are located than those of the national average due to
strong transportation infrastructure and a growing number of industrial parks and
manufacturing facilities in these areas. MPA (Media Partners Asia Ltd)
projections indicate that population, the number of households and disposable
incomes in the regions where the TBC Group’s five franchise areas are located
are expected to grow at a CAGR of 0.5%, 1.3% and 3.6%, respectively, between
2012 and 2017 versus a national average of 0.1%, 0.7% and 3.2%, respectively,
between 2012 and 2017.
What do
they offer?
·
Offer 3 different forms of services. APTT offers 3 different form of services – (1) Basic Cable TV, (2)
Premium Digital Cable TV & Broadband services to households and business in
these areas.
·
Below summarize its key
business operation highlights:
From Company's Prospectus
Definition:
RGU - Basically it means name of subscribers
ARPU - Average revenue per Unit
Churn Rate - Existing % of subscribers canceling their
subscription
·
High barrier of entry due to extensive network coverage
needed. APTT business model entails high barrier
of entry due to its extensive network coverage needed.
From Company's Prospectus
·
APTT operates its
Cable TV and Broadband services through a self-owned 750 MHz hybrid fibre cocial
backbone that connects the HFC networks. As at FY12, the HFC Network consisted
approximately 13,828km of coaxial cable and 2,135 km of fibre optic cable.
How does
the financial statement looks like?
·
The interest will
drop substantially after the IPO as APTT will use it to pay off its expensive
loan and reduce its overall net gearing ratio.
From Company's Prospectus
·
In addition, based on the pro forma FY12, the NAV will be
at approx S$0.93. This represent a small 4% premium over its IPO price of
S$0.97, which I think is fair.
From Company's Prospectus
How does
the projection looks like?
·
It will be very
technical if I go through this and it will be really boring. But base on my
personal due diligence, I agree with the big item but there is still some part
I have suspicion over.
·
Nevertheless, I will
stay conservative and agree that the FY13F number of 7.51% is highly probable,
but the FY14F might just be a bit too optimistic. But going forward, I will
assume that at IPO price of S$0.97, I will think that achieving at least 7%
dividend yield shouldn't be a problem.
From Company's Prospectus
Last but
not least, will I invest?
Key investment highlights
·
High barrier of entry
with stable dividend. Like I mentioned, to build a network as extensive as them
is not going to do it overnight. So this is a very mature piece of asset with
high barrier entry. Therefore I think it should provide a very decent and
stable dividend which is what the market will like.
·
Cornerstone investors. Well, Soro's Quantum
Fund is investing in it, and I don't think I'm smarter than him. So I shall
just follow him.
Key risk
·
Lack of growth
opportunities. Unlike REITs, APTT has no positive pricing reversion potential as the
pricing for the Basic Cable TV is actually capped by the federal and state
government.
·
Their only revenue growth is to increase its penetration
into the Premium Cable TV (which there is no cap) and Broadband, which is very
low at 14.7% & 23.3% respectively.
·
In addition, I won't be betting a lot on M&A as after
the IPO, the net gearing will be at 60+%. They will need to leverage up a lot
if they were to big acquisition and I'm not so sure about it.
Overall
·
Pump and Dump. I will definitely
subscribe some and if it performed well like the latest croseus retail trust, with
20% one day gain, I will sell it. If not at S$0.97, and a dividend yield of at
least 7%, I'm a happy holder too.
Below provide the
expected timeline. Like I always say, May
the odds always be with you~
From Company's Prospectus
