Friday, May 3, 2013

APPT - Asian Pay Television Trust

Prospectus here.

In a single line - AVOID.  Yes, the yield 8.25 - 9.0 % looks lucrative and the business model sounds like "starhub". So people may jump in not to miss the opportunity. But when you see the assets which MIIF is trying to put under APPT, then you may realize :)

Asian Pay Television is a newly constituted Registered Business Trust formed to acquire its initial
asset, the TBC Group. The TBC Group is Taiwan’s third-largest cable TV operator, with more than
751,000 Basic Cable TV RGUs as at 31 December 2012. 

Then, the revenue/loss/profit number for the last two years is not very promising either. Though the margins are good the interest /finance costs are taking out all the money.

And their assets are kind of bloated if I're to calculate their nav. the intangible assets are close to 1.8 billions (or 89% of their total assets). Not quite sure what kind of intangible assets a cable operator can hold. Is it the 'license to operate'? Not sure and any way I am not an expert so I'll leave it up to the analysts and better informed people.

The cable industry or living room entertainment sounds lucrative but I see a very high risk in countries with good connectivity. Especially, SG, HK, Korea, TW etc. Reason, is Internet and once people start to use Internet streamed content the biggest margin squeeze would happen. It may not happen in this year but I feel it's not too far in future too. At the same time, the broadband prices are dropping YoY. So any increase in broadband share would be offset by falling prices.

So why should I pay $1 for a business making losses and doesn't have a solid future ? Is it for the 9% dividend? or trap?

* I may be missing the whole point here but this is my own opinion and I am not trying to induce someone to get in to buy or not to buy * ;)

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