Oh ya, my update view on APTT has become a hold than buy.
Main reason is my doubts of the growth prospect of Taichung from 2015. The next 2 years of dividends should still be safe.
Nearby catalyst could be settlement of tax dispute. But is making me uneasy with the delay in official announcement o terms of settlement.
AM fraser has a report on APTT.
1) There is TALK (only) of refinancing its 2020 debts so that they can payout dividends quarterly. Unless the "new" debts allow significant interest savings with the same runway to maturity (e.g.2020), I do not like the smell of it.
Quarterly, semi-annually, what is the big deal? interest costs savings should be the primarily reason, when management gave such lame reasons, I also gave me the creeps that there is something more than meets the eye. Or maybe the analyst just jumping the gun.
i find the forecast growth of AM fraser too optimistic.
400K households at greater Taichung include all three franchise area Dali, Shalu and FengYuan. All three at its own, 133k to 188k household, as compared to its hometurf of 400k households. And APTT/TBC is already enjoying the highest 70% penetration rate at hometurf and is saturated (Growth is flat for a few quarters already.)
APTT is going in to "snatch" business, not link up households, it will not be easy. Assuming APTT entry can increase penetration rate of the 3 counters of greater Taichung to be 70%, it will be 18k, 13k, 16k(very rough estimate), about 47k more households, and there is rather a optimistic projection.
I also do not think APTT is striking 3 counties at the same time.
If we take ARPU of APTT as a guide, 538 NT$ for cable TV,47K household will just yield 1.05 million S$ revenue.
It seems there is too much hype over its Taichung expansion... The growth should come from its "upgrade" to digital premium channels, or its broadband selling.
But both are moving terribly slowly even in its home turf.
Anything wrong with my line of thoughts? appreciate comments
Then again, spending capex of close to 60 million to greater Taichung for 1 million recurring revenue, managment cannot be so stupid right??? They are capable of gaining market shares at expense of competitors???
In this long overdue correction, APTT stand out strong, I believed is due to the defensive yield of the counter.
At 85 cents, it still yield almost 10%.
The tax settlement with Taiwan tax bureau is settled within expectation as lied out in the prospectus.
When the tax announcement is made, I made a bid at 77.5 cents but got it at 77. Why is market so pessimistic about it?
1) competition is set to increase
2) growth at Taichung is highly uncertain, since they are unlikely to hit out at Kbro (to prevent retaliation at home turf) so the untapped market is relatively small.
But with the short term spanner gone, dividend at 10% for 2014 is all but assured. With capex within lower limit of my calculation for the next 2 years. 80 million instead of 120 mio, it is also highly unlikely that 2015 will see a drastic fall in distribution.
In the longer run, sustainability of distribution depends on the growth and how well they hold off competition. Will need to scrutinized the churn rate and the ARPU over the next 2 quarters beside subscription numbers.
But with 1.5 years of clear sky, could APTT benefit further with the movement to defensive yield?
It has already risen about 10% without declaring a 4 cents dividends, (they keep their distribution guide of 8.25 cents for 2014 when they announce tax settlement. Could APTT test 90 cents with the inking CD?
Volume is improving too, since the announcement. Finger crossed.
Second quarter profit was nearly 200% higher y-o-y. The fundamentals of the company have dramatically improved. Sustainable? I think would be good for 12 - 28 months. Beyond that, will have to monitor.