Asian Pay Television Trust trims Q1 DPU to 0.3 cent

SINGAPORE - Asian Pay Television Trust (APTT) has declared a first-quarter distribution per unit (DPU) of 0.3 cent, down from 1.625 cents in the previous year, in line with its previously stated plan to trim payouts.

Meanwhile, Taiwanese industrialist and Foxconn founder Terry Gou announced early on Tuesday (May 14) that he would cede his interest in the trust as he plans to run for president.

APTT's DPU for the three months to March 31 came as turnover fell on broadly lower average revenues per user (ARPUs) due to what the trust called "continued challenging operating and economic conditions in Taiwan".

Overall revenue was lower by 4.9 per cent year on year, to $73.2 million, on declines in all three business segments: basic cable television, premium digital cable TV and broadband.

The trust's net profit came in at $7.4 million - reversing the loss of $7.03 million that had been clocked the previous year on the back of a jump in income tax expenses. Currency losses and amortisation of deferred arrangement fees also came in lower than in the year before.

Operating profit slipped by 6.6 per cent, to $23.3 million, with ARPU dipping in all segments on the quarter prior. Earnings per unit was 0.52 Singapore cent, against a loss of 0.49 Singapore cent before.

The Singapore-listed business trust holds just one investment in its portfolio: Taiwanese cable TV operator Taiwan Broadband Communications Group.

APTT chief executive Brian McKinley said in a statement that the management was "cognisant of the saturated cable TV market in Taiwan and the challenges faced by the entire cable TV and telco industry", and would work to attract more "revenue generating units" while managing costs.

"At the same time, we remain focused in growing our fixed-line broadband market share beyond the current 30 per cent," he continued.

Competition from mobile operators' unlimited data plans has put pressure on broadband ARPU, the trust said, while asserting that, "with growing data usage and demand for high-speed plans, continued investment to increase broadband capacity and speed is key to driving growth".

Mr McKinley said in the statement: "Our advanced (hybrid fibre-coaxial) network has enabled us to provide data backhaul to some of Taiwan's major wireless operators as they continue their network rollouts and with continued investment to increase network capacity, we expect data backhaul to become a material part of the broadband business within five years."

APTT added in its outlook statement that it is "making headway with its strategy to develop new market segments, including enterprise clients" and will continue to introduce solutions such as smart home devices for broadband subscribers.

It said capital expenditure will stay high in 2019 because of the network investments, "but it is expected to trend down from 2020 onwards".

Taiwanese regulators had required analogue broadcasting to end by 2017, prompting a digitisation of the trust's subscriber base in that market.

"In the past, our capex was much more prescribed in terms of the digitisation, the exact timing of when it had to be done," Mr McKinley elaborated on an earnings call.

He added that, while the fresh network and broadband investments are important for the trust, it now has "more flexibility in terms of how quickly we roll out".

Separately, Mr Gou - who holds a 20 per cent stake in the manager's sole shareholder, Dynami Vision - has decided to sell that interest to Foxconn senior executive Lu Fang-Ming, APTT said.

Mr Gou's decision was made "considering his commitment to the 2020 presidential election in Taiwan", according to the announcement. He is gunning for a nomination with the opposition Kuomintang, and has claimed that he received divine inspiration to run, from sea goddess Mazu.

Macquarie Singapore, the previous owner, sold off the trustee-manager in 2017.

Mr Lu, who owns the other 80 per cent of Dynami, will become the manager's only shareholder once the transaction has been approved by regulators in Taiwan and has gone through.

The trust has guided for a full-year DPU of 1.2 cents for 2019 and 2020, down from 6.5 cents previously, which it has said will yield annual cash savings of "over $76 million" to go towards capital expenditure and lower the reliance on debt.

Gearing ticked up to 54.5 per cent for the quarter, against 54.1 per cent as at Dec 31, 2018.

APTT had previously said on April 15 that a committee - made up of Mr McKinley and four independent directors - was reviewing the Taiwan Broadband Communications stake, with the company expected to soon name an independent financial adviser for the deal.

The trust has now reiterated the earlier announcement in its latest financial statements.

When asked by a self-described "long-term investor" in the earnings call if APTT would consider selling the business, Mr McKinley said that "of course that's an option".

"When the board launched the strategic review, it was to provide . . . a potential alternative to unit holders," he said.

"Mr Gou is not a director or executive officer of the trustee-manager and accordingly, the proposed transaction will not have an impact on the operations of the trustee-manager and APTT, nor the status of the strategic review," APTT added in its new announcement.

The board also said that it plans to pay some of the management fee by issuing APTT units to the manager, "to achieve greater financial alignment with unit holders".

Mr McKinley added on the call that the manager would be able to better align its interests without facing trading restrictions during blackout periods, which he touted as another advantage to payment by units.

The amount that will be paid in units "will be determined after the trustee-manager has fulfilled its cash flow obligations", the trust said, with more information to be given to unit holders nearer to the next management fee payment in July 2019.

The counter opened at $0.169 on Tuesday, down by 0.3 cent or 1.74 per cent, after the announcements.