Asian Pay Television Trust (APTT)

[Shrivathsa]

APPT has issued a profit guidance for full year loss.

Interesting day to announce it, at the end of the year, after trading closed!

https://links.sgx.com/FileOpen/APTTProfi...eID=781925

From a dividend perspective, they have guided that they expect to maintain the guidance from the announcement "There will be no change to the distribution guidance of 0.525 cents per unit for H2 2023, and 1.05 cents per unit for the full year 2024".

[CY09]

The impairment it will make is non-cash by nature. On balance sheet, equity is SGD$1.125 billion, intangible assets are valued at SGD$2 billion. On SGX, the market cap is $0.125 billion. Likely Mr market is estimating that about $1 billion should be impaired.

I wonder how much will APTT impair though. It is a decent trust but post impairment, it will become highly levered and its offshore banking financing facility might be impacted

[weijian]

Hi CY09,

My suspect is that Mr Sporean Market values APTT based on its dividend yield, rather than the BV. After all, its BV is really intangible, unlike what you can see/touch like a property or factory, or even a brand name like OldChangKee.

Based on the results I shown in Nov2023, revenue has been on a steady decline. With higher risk free rates, this will be leading to a "material impairment loss" for FY23. My personal suspect is that without the former (declining revenue), the impairment loss (if any) wouldn't be "material". Of course, just my suspect. While Mgt has said that the accounting loss doesn't affect FCF and distributions, but these are just "effects" that we see. The "cause", ie changing customer habits will very soon change the FCF/distribution.

Finally, Mgt has said that the material impairment does not affect the financial covenants. They never make clear whether it is because the limits haven't been breached or it isn't a factor to start with. I don't remember that APTT has the sort of regulatory limit in terms of gearing like Spore REITs do. So even if gearing hits the roof, it is not going to breach any regulations (For REITs, its covenants probably has a clause that says it cannot breach its regulator's rules).

For example, if we want to apply for a mortgage loan from the bank, what matters most are 2 things - (1) Source of income and, (2) debt service ratio (DSR) to decide how much and whether to approve our loan. For source of income, I remember APTT's banks will only refinance its loans when it has renewed its license. For DSR, it is the interest cover ratio that we are familiar with. My guess is that these are the main factors affecting its existing loan facility. However, when the existing loan is due, it is highly probable that the banks will decide to give a lower refinancing amount. In the last few years, APTT has retained some cash to repay loans before it gotten new financing.

[CY09]

Their offshore sgd loan interest rate varies according to the leverage ratio as mentioned in the annual report. If leverage ratio goes higher presumably, offshore loan interest will increase