APTT – DBSV

High yield maintained

  • 3Q14 EBITDA of S$48.0m (+3% y-o-y,-1% q-o-q) was c.5% below expectations; quarterly distribution of 2 Scts per share in line
  • Softer economy led to muted premium cable and broadband growth, offset by lower opex
  • Stock offers 9.4% yield on 8.25 Scts distribution in FY14; FY15 distribution to be equal or better
  • Maintain BUY with unchanged TP of S$ 0.91

Highlights

Revenue impacted by softer economy

  • Revenue of S$ 80.5m (+2% y-o-y and q-o-q) was c.2% below our expectations. Growth in premium cable and broadband lagged expectations with lower than expected subscriber growth and Average Revenue Per User (ARPU). The company expects to miss its forecasted revenue target of S$ 323.8m in FY14. EBITDA dropped on lower revenues
  • Lower revenues were partly offset by lower than expected operating expenses. EBITDA is expected to remain strong via expansion into Greater Taichung area due to its better access to funding and superior content portfolio.

Outlook

Network expansion on track

  • Operations in the new coverage areas are expected to commence in 4Q14. APTT is expected to ramp up capex to S$ 20m – 30m in 4Q14, up from S$ 9.5m in 3Q14. The benefits of capex spend is expected to be seen in FY15. Further capex of S$ 20m – 30m is expected in FY15-FY16, in line with our expectations. Existing borrowing facility sufficient for growth capex
  • APTT has ~S$88m of funding facility available for growth capex, with most of the tax settlement already done (~S$ 4m remaining). This should be sufficient for expected capex of S$ 40m-60m in the next few years.

Valuation

Maintain BUY with DCF-based (WACC 7.2%, terminal growth 0%) TP of S$0.91.