I mentioned yesterday that Macquarie International Infrastructure Fund (MIIF) may be an attractive proposition. (article here >)
Today I present some data on TBC, which is a 47.5% owned asset by MIIF. MIIF increase their stake from 20% to 47.5%.
Why increasing their stake in TBC is good?
If we look at the business, it is pretty diversified
- Cable TV. Invests substantially in upgrading and maintaining their networks to provide high-quality of delivery of 100 channels. Their top-rated local offerings in include the ever-popular entertainment channels such as SET, CTV and ETTV. Popular news channels such as TVBSN and CTiN also play alongside kids’ favourite channels including ET YoYo and sports channels like VL Sports. In addition, a wide range of international brand names like HBO, Discovery, National Geographic , ESPN and CNN also feature in this strong line-up.
- Digital TV. Not well penetrated now, which might or might not present an opportunity to TBC. 4 high-quality channels from AAA Networks, including History HD, History, Crime & Investigation Network, and Biography. Near 70 of analog channels, now available on the digital platform.
- Broadband. TBC offers a high quality broadband internet access service via its hybrid fiber- coaxial (HFC) network. With its DOCSIS-3 ready infrastructure, TBC can offer high bandwidth services at the best value, so our customers can enjoy the best internet surfing experience.
The increase stake in TBC also cut its debt and interest payments. With less loan amortization, it means that TBC can pay out more of its EBITDA as dividends to MIIF.
The growth of its EBITDA and Margins are impressive as well.
( NTD mil )
We should see a terminal EBITDA margin growth. It cannot keep climbing like this. The adoption of digital tv is also low and we do not know if it will take off. The key is for them to move to higher ARPU.
The risk is that with mobile broadband, this may get cannibalized.
As investors we look at TBC to pay SGD 50 mil which is equivalent to $0.038 cents of dividend. That is nearly a 7.8% yield.
HNE and CXP will pay for the management fee and act as the booster.
Think of buying into MIIF as buying into a broadband operator. Evaluate whether a broadband operator in a market that is in a different demographic as Singtel, Starhub and M1. Would a 7.8% yield be a good compensation? Current yields of Starhub, M1 and Singtel are 6.8%, 7% and 5.5% respectively.
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