1 Important Number that Investors Should Know About Asian Pay Television Trust

Asian Pay Television Trust  (SGX: S7OU) is a business trust whose main asset right now is a company called Taiwan Broadband Communications Group which provides cable television and broadband services in Taiwan.

Recently, Asian Pay Television Trust had appeared on a screen I run weekly that shows which companies are near their 52-week lows. In my 52-week low article, I had briefly touched on the company’s latest subscriber trends and average revenue per user.

In here, I want to take a look at Asian Pay Television Trust’s return on invested capital (ROIC). I had explained in a previous article how the ROIC metric can be used as a gauge for the quality of a business. The formula for the ROIC is given below:

ROIC table

The simple idea behind the ROIC is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs will the reverse is true – a low ROIC is often associated with a low-quality business.

So how does Asian Pay Television Trust’s ROIC look like? You can see it in the table below (I’ve used numbers from the trust’s last completed fiscal year):

Asian Pay Television Trust ROIC table
Source: S&P Global Market Intelligence

The business trust has a ROIC of 98.2%, which means that it earns $0.982 in profit for every dollar of capital invested.

One point that investors should pay attention to here is that Asian Pay Television Trust has significant intangible assets of S$2.28 billion at end-2015. If these assets are included, the ROIC will fall to only 6%.

The ROIC metric can provide useful insight, but it can become even more meaningful if we should compare it to prior years or to the trust’s other competitors.

In any case, it should be noted too that further research beyond Asian Pay Television Trust’s ROIC is needed before any firm investing decision can be made on the trust.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.