Asian Pay TV Trust: Why I think It's Debt Is Manageable, Interest Cost and It's 13% Dividend Yield

Asian Pay TV Trust (APTT) is a stock I am looking at. This is because its debt profile seems manageable for now. For starters below is the debt profile of the trust:

Onshore Taiwan Debt: SGD$1.12 billion, Offshore Debt: SGD$87 million

Total Debt: $1,209 million

Onshore Taiwan Debt Interest, Taiwan Interbank (Taibor) : 2.1% 

Singapore Debt Interest: 7.7% 

CEO Talk

In the latest CEO update, he says APTT is trying to bring all its offshore debt to Taiwan and its not hard to see why. The cost of borrowing in Singapore is 3 times the cost of Taiwan!

With a promise of bringing the Singapore debt back to Taiwan in mid 2025 and with constant debt repayment by APTT, I do expect an amount of SGD$50 million will be returned to Taiwan.

In addition, while APTT has successfully hedged its Taiwan debt at 0.94% interest, it expires when its debt is refinanced in mid 2025. The current TAIBOR rate is 1.35% and I expect it to remain there. As for the refinancing, I think the eventual margin APTT will pay for all its debts is TAIBOR + 2%. This means an effective interest rate of 3.35%. Hence, I do expect APTT interest expense to rise by 3.4% next year.

Debt Repayment

However, the good news is APTT plans to pay down SGD$40 million in debt from its $1,209 million debt. This means a decrease of 3.3%. Factoring the decrease in debts and higher interest cost, 2025's interest expense will remain similar to 2024's.

Debt Management

APTT's debt is due for refinancing next year end.

With ability to service its debt interest and paying off some of its principal, I think its Taiwanese banker will refinance. Expected debt to ebidta is 9 times which should be okay 

Cashflow and Dividend

With only 30% of its free cash given as dividends currently, APTT has the capacity to continue giving 1.05 cents dividend every year, this despite the decline in cable TV business.

Therefore, I am confident APTT will be a dividend giant giving 1.05 cents annual dividend. Investors can use this parameter to judge how much should they pay to get an APTT share.

For me, I have added more share of APTT, a purchase of about 190,000 shares. This brings my holdings to 880,000+ shares. APTT will be a cornerstone in my dividend portfolio.

Asian Pay TV Trust 1H2024 Results: Good Result, Set to be Top 5 SGX Dividend Company

Asian Pay TV Trust (APTT) has released its 1H2024 results.

Summary

• Revenue Down, Net Profit Up due to good margin control
• Maintain 1.05 dividend guidance, translating to 13% yield

There is nothing surprising in its 1H report. While revenue is down due to the declining TV business, good margin control by the trust and its improving broadband business has cushioned the decline.

The trust produces about $90 million in free cash. Factoring interest expense on its debt, APTT cash generation ability is $48 million per year.

1.05 cents DPU needs $19 million in cashflow, that means 32% of free cash is used. It is sustainable.

Conclusion

APTT giving out a dividend of 1.05 SG cents is sustainable and given Taiwan's interest rate is not expected to rise, we should not expect downside revision to its dividends. 

The trust is in an essential service, however, its leverage ratio is high (58%). I am valuing APTT to be a 7% dividend yielder, the company can be a 14.5-15 SG cents company for its recurring dividend. A potential upside of 81% is in store.

United Hampshire REIT: 10% Dividend with Growing Rental Income, 70% upside

Just as I had expected, UtdHamsphire REIT delivered a good 1H results. 

Dividends declared was 2 US Cents.

Retail Business is Doing Well

Its stripe malls have continued to provide increasing rents. With the low supply of stripe malls in USA, Utd Hampshire REIT will continue to have a high occupancy rate. Self storage business has remained strong as well.

Yesterday, the REIT sold one of its property at 8% above valuation which indicates its real book value of its properties is indeed above the 72 US cents listed. Given how cash generative its assets are and that it is in an undersupplied USA property sector, it is likely the real NAV is US 75 cents

Interest Expense

Interest cost for the REIT is now at 4.93%. In my view, if interest costs starts to go down from now, UtdHampshire REIT will be reporting stronger results. There is no refinancing risk until 2026.

9.5% Dividend now, 11% Dividend Next Year

On the tail wind of falling interest rates and rising rental revenue, I expect Utdhampshire REIT to report a 5% increase in net profits this year. This means dividends will grow. All in all, this is a very good result. I will not be surprised if its share prices will move up 50-70% over the next few months on the basis of re-rating due to its sustainable business model and riding on the tailwind of falling interest rates in USA which makes its cost of debt much cheaper.

Leverage is expected to fall as well post sale of it's asset yesterday 

At expected dividend of US 4 cents per year, this stock is at least worth US 72 cents

Overall, this REIT is a good buy for any investor.

Changi Airport Group Earns $430 Million in Annual Profit, Revenue Up 44% year on year

Changi Airport Group has reported its full year results end March 2024. And it is a very good result (click here for full year results).

Profit to Shareholders $430 Million, Revenue up 44%

As per the headline, awesome profits with much of the profits coming from Airport operations. 

Page 64 shows Airport operations revenue rose 46% and all of its profits came from airport side. Jewel shopping mall continues to make losses at about $20 million but its operations is improving. Do note airport operations do not just cover Singapore because Changi Airport has stakes in other airports as well.

Cashflow

The group turned in a free cash generation ability of $100 million and it is worth noting in Page 14, Changi Airport Group received $464 million in government grants under "Cashflow from financing activities". Without the grants given by the government, it could be possible that Changi Airport Group will be loss making.

Shareholders will be receiving about $141 million in dividends (~30% dividend payout)

Valuation

Its a bit dicey to talk about valuation. 

If Changi Airport Group (CAG) was listed, the Singapore government would not be justified to give the group approx $464 million in grants in a year. This is because public funds would have been used to help a private listed company. CAG is currently a company under the Ministry of Trade and Industry. In this sense, if Changi Airport was really listed, it could be a net zero profit entity.

However, given the monopoly position the airport holds, that it is an aviation hub, with growing passenger traffic and T5 expansion, I do think a $200 million profit can be eked out even without government grants. Overseas listed airports have been going at 30-40 times price earnings. The company could be worth a $7 billion valuation if it is ever listed. 

This market cap will also enable it to qualify to be part of the FTSE ST Index. It will be an interesting scenario if Changi Airport is ever listed.

PRIME US REIT: Financing Completed, Safe for 02 Years

PRIME US REIT has made an announcement it has completed refinancing of its July 2024 debt due. The new debt facility will run until July 2026, with the option (which likely will be exercised) until July 2027

Effects of Loan Renewal

With the conclusion of its debt and sale of Florida property, the REIT's leverage ratio will fall and the amount of loan it has to service is reduced.

In my view, the REIT is now of a much safer profile, even safer than Keppel Pacific Oak's

Dividend?

In terms of distributable income, I believe the REIT will have US$38 million for the full year and can sustain a 2 US cents dividends, even with 10% retained. However, given the need to conserve cash, dividend should be lower than 2 US cents. An indication is during the AGM where the CFO said if the REIT pays 90% of its taxable income, it will get tax benefits from USA.

The loss in the sale of the Florida property might be recognised to ensure taxable income for 2024 is low.

I think dividend will still be higher than what unitholders received in 2H2023. The REIT could be re-rated to 20 US cents in the upcoming months.

The debt renewal removes the event of doing a force sale during the trough of a commercial real estate oversupply. 

Dividend Stocks - Better than Insurance or Housing Investments Out There

Its unfortunate the topic of dividend investing is not touch more these days. Among markets like SGX and overseas, many REITs/Business Trust with sustainable cashflow are giving above 7% yields annually, this far outperforms any insurance or housing investments our local advisory has been touting. 

Buying these dividend companies are simple and in my view, definitely more rewarding than the investment fads peddled. WIth a cashflow of 7-10% yields to support; they are definitely better than property and insurance products. Even pairing a simple term insurance plan with these dividend stocks will outperform many insurance-linked (ILPs).

SGX Dividend Giants

SGX has a few worthy to mention REITs. While they are not household names, the business they are in are stable and tenants leased to are strong.

Elite UK REIT (10% Dividend)

The REIT has a concentration of only 01 major tenant and that is the United Kingdom government. Two ministries of the government rent office space from Elite UK. Having such a strong tenant, the risk of default is low and the UK has signed leases with the REIT that runs to year 2028 with no early termination. The rental contracts has annual increase in rent, in line with UK inflation rate.

The REIT carries a 10% dividend yield and leverage ratio is healthy in the low 40%. In terms of property, this is a good investment. 

UtdHampshire US REIT (9.5% Dividend)

The REIT is in the staple essentials of USA and operates strip malls countrywide. This is where residents in the community go to buy their groceries, buy medical products and neccessities. Tenants of Utdhampshire are Walmart, Home Depot etc. Putting it in the local context, it is like to going to your town centre or HDB shopping mall to make a weekly grocery purchase. Essentially, the REIT is in the essential retail business for USA (no pun intended)

Leverge wise, the REIT is not running afoul of MAS's current leverage requirements. Balancing its capital requirements and only distributing 90% of its earnings as dividend, the REIT gives 9.5% dividend and uses the remaining capital for CAPEX. This is commendable.

Overseas Dividend Masters

LINK REIT (8% Dividend)

Similar to UtdHampshire REIT, Link REIT operates neighbourhood malls in Hong Kong and Singapore. LINK REIT model is that it operates malls where residents in the commmunity make frequent commutes to buy neccessities and grocery.

Because LINK REIT employs a very low leverage (19.5% as compared to others of 35-45% leverage), the REIT's dividend is not as much. However, an 8% dividend while employing a low leverage ratio of 19.5% is commendable. LINK REIT is well known in the investment community and is a "role model" REIT that Businesstimes looks at and had considered for Singapore REITs to follow.

China State Owned Companies (SOE) (7% - 9% Dividend)

Unloved but delivering consistent strong earnings, many of these Chinese SOEs have given comparably high dividends. As these are majority owned by the Chinese government, the risk of them defaulting is remote given their economic importance to China.

Many of these companies are traded on the Hong Kong market and can be bought by us Singapore investors via Hong Kong market. After factoring the dividend taxes, their yields are 7-9%. My picks among these SOEs are Agricultural Bank of China, ICBC, Petrochina, Sinopec. They are the market leaders in their industry and have economic importance to China.

Portfolio Purchase: More Dividend Companies!

Utilising the market sell down, I did a purchase of a few China Stocks- Li Auto and Petrochina. Secondly bought more Utdhampshire US REIT. There was a partial sell in Alibaba.

My expected annual dividend is now $25,200 or $2,100 per month.

Dividends

I have been saying time and time- overseas companies are giving outsized high returns. As compared to Singapore stocks and even properties, the risk/reward ratio is too skewed in favour of overseas company. I would buy overseas companies anytime.

As Singaporeans, we too have the advantage of a strong Singapore Dollar currency to buy these overseas assets at a cheaper price relatively. 

I will continue to buy stakes in overseas company. Utdhampshire, Link REIT and china SOE are my targets.

What I Bought

Petrochina- the largest upstream oil producer in China. It gives a 7.2% dividend yield after  accounting for China's dividend tax.

United Hampshire US REIT- I expect the REIT to report a decent result next week and be a 9% dividend yielder. From next year, dividend will start to increase because of its built in annual rental escalation contracts, coupled with the fall in expectations of SOFR rates arising from the Fed decision.

Li Auto- Speculative play on China's EV market.