3 questions matter.
1) Is there a deterioration in subscribers numbers and ARPU?
Hardly any improvement or deterioration in percentage terms. ARPU dip very slightly, most probably in preparation of the potential competition to come. Looking at the results, competition might not have begin.
2) What is the projected capex?
Projected capex for network expansion in 2014 remained at 40-50 mio, unchanged from Q1
Thereafter, it will be 10-15 million for 2015 to 2016. The bulk of capex for network expansion will be in 2014.
Since it will most probably in 2015 that we will see significant connection capex, and assume 10K connections a year, highly optimistic, capex will be 2.5 mio more per year.
So think we can assume capex of 60 mio, 30 mio and 30 mio over the next 3 years. Assume that use 20 million from cash flow to fund capex, total capex to be incurred by drawing down loans will be 40 mio, 10 mio, 10 mio, the 120 mio loans earmarked for expansion is not drawn down yet. By 2016, 60 mio loans at 4% will mean Finance cost of 2.4 mio more.
Assume 2016 FY
EBITA 200 mio
Interest cost (45 mio)
Loans 10 mio
Capex (30 mio)
Tax (20 mio)
DPU - 115 mio
Assume zero growth, and no lost of ground to competitors or that it get offset by the growth from TaiChung.
Verdict: capex risk to distribution is low
3) Is progress in network expansion made.
Commercial operations pushed to Q4 from 2H(as announced in Q1). Again, management has jumped the gun.
It is very obvious the chairman is trying to a mini starhub on APTT. Bundling strategy, and quarterly payout. The Bundling strategy has not shown results yet. The growth should not come from basic TV subscribers but the increase in broadband or premium TV. The reason cited is poor economic conditions in Taiwan, lets give the chairman more time to see if he can do a "starhub" in Taiwan