Why this Stock Could Double and Pay you 10+% Dividend While You Wait

Asia Pay TV trust (APTT) is a trust which offers TV and broadband services in the Northern and Central regions of Taiwan. It was a spin off from the MIIF fund of Australia.

Beaten Down Stock

One reason the trust spots a high dividend yield is because its share prices have fallen 90% from its all time highs and market are fearful of further dividend declines; over the past 10 years, APTT's dividend has been slashed from 8 cents annually to now 1.05 cents. 

Time Have Changed

In the early years of its IPO, APTT had been funding its dividend by taking on more debts. This caused the APTT of today to be over leveraged, burdening the trust with a high interest expense. 

However, in the past 4 years, the new management has dramatically slashed dividends to its current 1.05 cents DPU and used the remaining cash to pay down its debts gradually. 

The current 1.05 cents DPU of $19.9 million cashflow is only 13% of its operating cashflow generation ability of $152 million. With CAPEX guided for $35-38 million, this highlights APTT's reduced dividend of 1.05 cents is sustainable for a long time.

Financing Expenses

Due to the legacy trust manager incurring a huge amount of debt, APTT now has $1.2 billion in debts. Fortunately the financing expense amounts to $44 million a year and when its hedge expires, should rise to $46 million per year based on current interest rate environment.

1.05 cents dividend per unit is Sustainable

Looking at its current cashflow ability of $145-$152 million ($38 million as of latest quarter), its definite APTT can continue paying 1.05 cents DPU which translates to a cash outlay of $19.9 million. 

This is why I am confident despite the declining business in 1 segment, APTT will maintain a DPU of 1.05 cents. Until market appreciates the stability of its current dividend and erases the fear of further dividend cuts, investors are now owning a 13% dividend yielder. 

With SORA now at 3.6%, I view APTT can be equivalent to the higher dividend yielder SG Reits which commands a 7% dividend yield. With that, I will be owning this stock until it reachs the 15 cents range. This means a doubling in returns for owning APTT now.

<Vested in APTT>