APTV –OSK DMG

IPO Note

Asian Pay Television Trust (APTV) is coming to market as a high-yield play via a business trust structure, offering initial yield of 7.5% for current year and 8.5% for 2014. Given the defensive attributes of the business in a regulated industry, being the sole licensed provider of cable TV services in five closely clustered franchise areas in Taiwan, and with a growing subscriber base of over 750,000 users, we think the issue will find favour with investors in the current yield-hungry environment. Growth will be driven organically by cross-selling and bundling initiatives of its broadband and premium digital TV services. APTV intends to distribute 100% of its distributable free cash flows.

Cornerstone investors for the issue include Quantum Partners, the investment vehicle of George Soros, Prudential-linked funds, Signature Global Investors, a unit of Canada's largest investment-fund companies, and Lion Global Investors, among others. In terms of yield, APTV stacks up well against its peers, handily beating the 6.3% yield (2013) for the business trust sector and 4% for the Singapore-based telco players. We see scope for yield compression to 7.5% (2014), suggesting a fair value of SGD 1.10, representing an upside of 13% from the IPO price. Subscribe.