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Asian Pay Television Trust Delivers Results In Line With Forecasts

Asian Pay Television Trust (SGX: S7OU), or APTT in short, released its 4th quarter and year end results for 2013 after the markets closed on 24 February 2014.

APTT became the first publicly-listed business trust in Asia with a focus on pay-TV assets after it floated in Singapore’s stock market on 29 May 2013. Its investment goals goals are to invest in mature, cash-generative pay-TV and broadband businesses in Asia.

Asian Pay Television Trust’s seed asset comprises of Taiwan Broadband Communication (TBC), Taiwan’s third-largest cable TV operator. TBC operates exclusively in Taiwan and offers basic cable television services, premium digital cable television services and broadband internet services to households and businesses.

For the quarter ended 31 December 2013, APTT announced total revenue of S$78.7 million and Asset EBITDA (i.e. the earnings before earnings, taxes, depreciation, and amortization that comes from TBC only and “does not include expenses attributable to the Trust and offshore entities”) of S$51.8 million with the corresponding Asset EBITDA margin (Asset EBITDA divided by revenue) stated at 65.8%.

As for the twelve months ended 31 December 2013, total revenue stood at S$311.5 million, largely in line with the forecasted results of S$310.8 million in the trust’s offering-prospectus. Meanwhile, Asset EBITDA also came in at S$202.1 million, just a hair’s breadth higher than the S$200.4 million forecast outlined in the prospectus. It is worth noting that APTT’s results are compared with its forecasts as it is a new listing and has no prior results.

As the acquisition of TBC’s assets and business was only completed by the trust on 29 May 2013, there was also more granular detail on the trust’s financial performance for the period from 30 May 2013 to 31 Dec 2013.

On that front, the trust earned revenue of S$185 million, with profits of S$45.1 million. Asset EBITDA for the period came in at S$120.5 million with its corresponding margin at 65.1%.

Financial Position

As of 31 December 2013, APTT’s cash balance is at S$96.2 million, which is sufficient in covering the upcoming distributions of S$59.3 million to be paid on 28 March 2014. Proceeds from the issue of units during the IPO resulted in a massive net cash inflow of S$1.017 billion. Nevertheless, the huge influx of cash was largely offset by 2 key things: 1) The S$670.09 million acquisition of their main seed asset ,TBC; and 2) Repayment of borrowings of up to S$171.05 million.

The trust has a gearing level of 38.9% with total debt of NT$23.05 billion (approximately S$975 million). APTT has fixed the interest rate on the bulk of its debt at approximately 4% per annum using interest rate swaps that were entered to hedge against any potential rise of borrowing costs.

Outlook

As a trust focusing on broadband and Pay TV services, it is important for APTT to increase its subscriber base to drive growth. On that front, APPT is building on its network expansion across Taichung to cover more than 30% of new homes in the first half of 2014, with the funds needed for the expansion provided by existing borrowing facilities.

APPT also confidently pushed its digital set top box penetration target from 55% to 70% by the end of 2014. This is expected to drive future Premium digital cable TV revenue and maintain APTT’s digital penetration position ahead of government targets.

Lastly, the trust’s “focus remains on driving growth in cash flows through up-selling and cross-selling of services across the subscriber base, driving non-subscriber revenue and progressing the network expansion.”

Valuation

With a net asset value of S$0.92 and the trust currently trading at S$0.80, it is now selling for 0.9 times book value. Based on the trust’s guidance for a distribution of 8.25 cents per share for 2014, the forward yield for the trust stands at 10.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.