Asian Pay Television Trust

AmFraser Securities, Nov 12

RESULTS consistent with expectations. TBC (Taiwan Broadband Communications) achieved revenue and net profit of S$78.6 million and S$18.2 million in Q3-2013, which were 2 per cent and 0.4 per cent above our forecasts.

Premium digital cable TV outperforming: Driven by its growing set-top box penetration and an increasing subscriber take-up of higher revenue generating tiers, TBC enjoyed a stellar performance in its Premium digital cable TV segment. TBC's segmental ARPU (average revenue per user) and subscriber numbers are already ahead of our expectations. As at Sept 30, 2013, Premium digital cable TV has total subscribers of 121,000 as well as an ARPU of NT$208 per month, exceeding our original full-year forecast of 121,000 subscribers and ARPU of NT$202/month. Accordingly, we raise our subscriber and ARPU forecast for the Premium digital cable TV segment to 124,000 and NT$208/month respectively.

TBC has decided to move ahead with its expansion plans across the greater Taichung area and expects its proposed expansion to be accretive to its distribution yield in the medium term. FY13 and FY14 distributions will not be negatively impacted by the planned expansion. We expect TBC's expansion across the broader Taichung area, starting FY14, to generate positive free cash flows, thus resulting in yield accretion.

Our projected FY15 DPU has increased from 8.8 cents to 9 cents. While NCC (National Communications Commission) has conditionally approved applications from VeeTime and West Coast Cable TV Co, we believe they are unlikely to pose major competitive threats to TBC. Given their relatively smaller scale, these licensees are unlikely to satisfy the 100 per cent network coverage requirement within three years, in our view.

Reiterate "buy" on fair value S$1.04. APTT has re-affirmed its distribution guidance of 4.13 cents per unit for the six months ending Dec 31, 2014, that is payable in March 2014. With a projected FY14 yield of 10.7 per cent, we cannot stress enough the attractiveness of APTT as a high-yielding play.

Moreover, APTT offers strong growth upside that is supported by continued up-selling and bundling initiatives, increasing set-top box penetration and greater availability of digital content.

BUY