Monday, May 13, 2013

Twice Lucky in a Month? - Asian Pay Television Trust IPO

Previous post: [Upcoming IPOs - Croesus Retail Trust & Asian Pay Television Trust]

Introduction to Asian Pay Television Trust IPO
Asian Pay Television Trust will list in the shadows of Croesus Retail Trust that went live on 10 May to a tremendous investor appetite for the high-yielding IPO. So, will it be a repeat of the stellar performance of Croesus Retail Trust?

Key figures
  1. S$0.92 to S$1.00 per share indicative price range
  2. 7.29 to 8.25% dividend yield (2013-2014) on a semi-annual basis (30 June and 31 Dec) based on the highest offer price of S$1.00
  3. S$1.4 billion expected to be raised
  4. 9 cornerstone investors including Quantum Vehicle, the investing fund controlled by the legendary George Soros
[Link to lodged prospectus @ MAS here.]

If you are a new IPO investor, do check out my blog page on Guide to IPO Investing.
Even if you are a seasoned IPO investor, you may wish to check out 2012 and 2013 IPO listing performance at SG IPO Statistics for more insights to optimise your balloting chances!

Prepare to start applications on 17 May till 27 May. Listing date targeted 29 May 2pm.


Analysis of the IPO
Details are still tentative and dependent on the decided indicative price as the book building process is still underway so here are snippets of what I have read/heard/seen and my initial thoughts. More to follow when the figures are finally decided.
  1. High yield of 7-8% for 2013 and 2014
    1. [The good] This yield, similar to Croesus Retail Trust's yield range, is going to appeal to yield hunters. The performance of the Croesus Retail Trust IPO serves to remind many of us, purported contrarians, that the yield-hunt is yet to be over and there is still much more yield compression that we will see. The next high-yield equity IPO that listed before Croesus Retail Trust, Mapletree Greater China Commercial REIT, listed in March this year has already appreciated by 20% from its listing price and 8% from its first day close. More statistics here.
    2. [The good] A clear distribution policy where the trust will distribute 100% of its distributable free cash flows on a semi-annual basis.
    3. [The bad] that seems slightly more risky than initially thought (as with the Singaporean mentality, we favour questioning items that seem too good to be true; being critical is a trait though)
    1. High cornerstone and institutional take-up S$451 million of the IPO, almost 32%.
      1. [The good] There will be adequate price level support for the listing period
        1. <1% of total units (25 million units) offered in the Public Offer. 
        2. 66% placement tranche
        3. ~32% of total units will be held by cornerstone investors
      2. [The bad] If you had complained about your Croesus Retail Trust IPO balloting results, this public offer would have an even smaller chance of a successful ballot.
    2. Business trust concept
      1. [The good] Business trusts on the SGX tend to operate with a slightly higher forward-looking yield so it can be said that there is still further upside to their prices in this chase for yields. 
      2. [The bad] Truth is, business trusts listed in Singapore tend to be less favoured by investors as compared to REITs basically of their operating structure. In short, business trusts are more complicated in their value proposition. REITs also pay less taxes on their income in Singapore.
      3. [The good] Asian Pay Television Trust yield of ~7-8% (based on S$1 offer price) puts it as the 2nd highest forward-looking yield business trust on the SGX, where the next closest is Croesus Retail Trust (6.5% at S$1.145), K-Green trust and Hutchinson Port Holdings. It is only surpassed by Religare Health Trust of 8.4%.
    3. Taiwan infrastructure play that is also the only one listed on the SGX
      1. [The good] Ideal for retail investors seeking exposure to Taiwan and cable television market. The cable television market in Taiwan is the 5th largest in Asia by revenue.
      2. [The good] It has good comparative advantage in the pay-TV business as it is one of the 3 largest operators in Taiwan. 
    Market Outlook
    Just a quick highlight, Croesus Retail Trust closed with a first day gain of 23% above offer price. This just served to highlight the tremendous liquidity that the Singapore financial market has been enjoying and that high-yielding equity are still hot in demand despite the yields reflecting their relative risk. Contrary to some belief that the yield-chase is over in 2013 and beyond, the economic story has yet to brighten and we can see that yield compression is still taking place actively in the markets of today.
    More IPO statistics here.

    Conclusion of the IPO
    In essence, I am sensing a repeat of the stellar performance of the Croesus Retail Trust IPO. Maybe slightly more muted given that Croesus Retail Trust has already satisfied some demand but definitely not too far off. In fact, there are huge similarities to be drawn between these IPOs of 2 business trusts. They are similarly operated overseas, so Singapore will not be able to see their assets being put to work first hand. Like Croesus Retail Trust, which had a poor gearing ratio above many other concerns, this trust is not without them. But as it seems, the market is intent on ignoring these risks in search of high-yielding equities. This trust has a huge offering, surpassing the Mapletree Greater China Commercial Trust of S$1.3 billion, which will be a truer test of the capital market in Singapore and the clamor for yield even in 2013. For now, let's wait for the price to be finalised before making a decision based on the institutional demand.

    All quoted figures in Point 3 are derived from the OCBC Investment Research S-REITs Tracker Compilation dated 13 April 2013. As it is an uncirculated copy, I did not upload it; I am sure you can get it from your broker or more updated data from Bloomberg terminals.


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