Is There Any Value Left In Asian Pay Television Trust?

Business Trusts offer investors a way of investing in cash-generating assets such as infrastructure, real estate and transportation assets.

As with REITs, a Business Trust is managed through a trust deed with the trustee having full legal ownership of the trust’s assets. The trust manager has the responsibility of protecting the interests of the unit holders and to manage the trust’s business.

In Singapore, there are 11 listed business trusts managing a variety of assets such as ports, medical establishments and real estate. Combined these trusts have a market value of S$15b.

The 11 companies also have an average price to book ratio of 1.1 and an average dividend yield of around 6%. This could flag up Business Trusts as a sector with potential value.

At first glance, Rickmers Maritime (SGX: B1ZU) which operates 16 containerships could appear to be a company that might attract value hunters. It has an earnings yield of 7.9%, an above-average dividend yield of 11.7%. Additionally, it  is priced at only 40% of its book value.

However, digging a little deeper suggests there could be good reasons for these figures. Following steady declines in its net income over the last few years, the Trust actually made a net loss in the last financial year.

Whilst the company has maintained its dividend, this has come at the expense of an ever increasing payout ratio. Over the same period Rickmers’ total assets have fallen. The Trust’s current ratio is only one.

An alternative among the Business Trusts that may spark more interest is Asian Pay Television Trust (SGX: S7OU). In 2010 the company made a net loss of S$30m. In the last financial year, the company reported net income of S$114 million representing a significant turnaround.

Off the back of these recent highlights, the company paid a dividend in 2013. Currently the dividend yield is 9.1%.

Asian Pay Television Trust certainly seems like an outfit with a promising future. However, at S$0.93 a share, the company is priced near its 52 week high. It is also priced at around its book value, which could suggest that the value of Asian Pay Television Trust has already been realised.

Business Trusts are unlikely to capture the interest of value investors. This is largely because of the unique structure of these companies that can pay dividends from cash flow rather than profits. While value investors might be left a little perplexed, income investors might be interested, though.

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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 Adam Kuo doesn’t own shares in any companies mentioned.