Asian Pay Television Trust

Asian Pay Television Trust (APTT): Delivered 1Q15 DPU of 2¢ and reaffirmed its distribution guidance of at least 8.25¢ for FY15, which translates to a distribution yield of 9.2%.

For the quarter, revenue expanded to $82.3m (+6.6% y/y, +0.6% q/q), underpinned by the service offerings from its sole asset. Taiwan Broadband Communications (TBC).

Basic cable TV sales grew 6.8% to $65.8m on channel leasing and airtime advertising sales, while premium digital cable TV generated $3.7m (+8.1%) in revenue from its 136,000 subscribers (+2.3%) o slightly lower ARPU of NT$188 (-3.6%) due to bundling discounts offered as part of subscriber acquisition.

Broadband revenue climbed 5% to $12.9m on flattish subscriber growth to 185,000 (+1.1%) and ARPU of NT$526 (+0.2%).

TBC achieved digital set-top box penetration of 95%, up from 82% in Dec '14, on track with management's target for full penetration by end-2015.

EBITDA margin narrowed marginally to 59.1% (-2ppt y/y, -0.6ppt q/q) as operating expenses (+11.9%) outpaced revenue growth, due to increased staff costs (+12.1%) and higher legal and professional fees relating to the refinancing of TBC's borrowing facilities (+19%).

However, bottom line slipped into loss of $5.6m, hurt mainly by write-off of arrangement fees ($22.5m) on previous borrowing facilities, mark-to-market derivative loss ($6m), one-time debt advisory fee ($5.5m) and higher finance costs ($12.3m).

Aggregate leverage edged up 0.8ppt q/q to 44%, as APTT rolled out its network across the Taichung region. Capex spending of $33m has peaked out in FY14 and is expected to ease to $20-25m and $10-15m in FY15 and FY16, respectively.

At the current price, APTT is trades at 9.2% yield and 0.99x P/B. Bloomberg consensus has 3 Buy, 1 Hold and 2 Sell ratings with an average 12-month TP of $0.97.