(23-03-2014, 04:28 PM)Nick Wrote:(23-03-2014, 04:11 PM)tanjm Wrote: I had a quick look at Starhub. It has been paying about 340 million in dividends a year. Its free cashflow for the last 2 years has been 461 and 291 million respectively (difference has been capex looks like). It is also fairly similarly indebted. It faces fierce competition with SingTel in an almost saturated market.
So..... would anyone venture to explain why Starhub is a 5% yielder and APTT is a 10% yielder? FX accounts for some of it of course, but this is a very wide gap.
Starhub
Total Debt: 687.5 mil
EBITDA: 732.7 mil
Total Debt to EBITDA: 0.94x
APTT
Total Debt: 975 mil
EBITDA: 195 mil
Total Debt to EBITDA: 5.00x
Huge gulf in their gearing.
(Not Vested)
EBITDA is "Earnings before Interest, Tax, Depreciation and Amortization". So its a slippery concept esp the depreciation part. In theory, depreciation (absent of accounting tricks) should roughly mirror capex on average.
Depreciation for starhub was 270m while 25m for APTT.
On another measure, EBITDA over revenue, APTT is twice as efficient coming in at 65% versus 35% for Starhub.
One way to treat indebtedness is the "distance" of APTT from defaulting. EBITDA/interest costs is 8 times for APTT and a massive 36 times for starhub. APTT has no refinancing until 6 years from now, but if it did refinance at 200bp higher than now, its ratio would go down to 5 times - still ok. So while the ratio for starhub is much higher, if we are only concerned with defaulting, its not a linear comparison.
APTT's yield is very high. Even Asian non investment grade bonds currently yield on average about 7%.
I'm not saying it should yield like starhub, but that the yield gap is "ridiculous", esp considering that it is shielded from refinancing risk until several years from now and we can consider its EBITDA to be stable, if not slightly growing.