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.
| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |
| EBITDA ( NTD mil ) |
1686 | 2087 | 2476 | 2891 | 3206 | 3474 | 3673 | 3902 | 4078 | 4287 |
| EBITDA Margin | 42.2% | 48.3% | 54.5% | 55.7% | 58.2% | 59.6% | 60.9% | 61.4% | 62.0% | 64.3% |
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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Drizzt
Monday 10th of October 2011
yes i think the differ is in TBC. do note that the shares left is around 1240 mil.
your projection of earnings look low. in 2008 TBC contribute 18 mil in 2008 16.6 mil in 2009. I believe the best case is to see their november quarter results.
based on my estimates it should be able to meet. even dbs vickers analyst estimate that they should be able to meet that.note that in 2015, they may need to get debts refinance. there is still 4 years for ebidta to grow further isn't it.
sean
Monday 10th of October 2011
Hi Drizzt,
Thanks for replying. I only just saw your earlier post on the estimation of MIIF income and I thought they were pretty similar to soemthing I have done recently.
Your Analysis Let us estimate the payouts to MIIF from each of the underlying assets in the long run (FY2012). Current share price $0.49 • The dividend guidance from MIIF is $0.055. That is 11.2% yield. To pay out that, MIIF needs 1297 mil outstanding shares x $0.055 = 71 mil. 1. Taiwan Broadcasting Corp (TBC) will contribute SGD 47 mil – SGD 49 mil per year. This is from its 47% share in TBC. Based on the original 20% stake in TBC, in FY 2010, TBC have loan amortization, TBC paid out 13 mil. In FY 2008, TBC have no loan amortization, TBC paid out 18 mil. Going forward, we know that TBC will not be paying loan amortization and that cash flow have risen 10% since then. This works out to 18 x 47.5/20 x 110% = 47 mil. 2. Hua Nan Expressway (HNE) will contribute SGD 20 mil per year. HNE have been struggling with a de-tolled expressway. Also in 2014 onwards, loan amortization will increase for HNE, any growth from 2014 onwards are likely to be eaten by the increase in loan amortization. 3. Changshu Port (CXP) will contribute SGD 5 mil per year. 4. Management Fees are estimated to come up to SGD 10 mil per year. 5. Estimated Safe Dividend Potential: 47 + 20 + 5 – 10 = 62 mil. This is equivalent to $0.048 cents. At current price, the yield is 9.6%.
I actually asked the same question as you and below is my chain of thought.
My analysis Dividend of 5.5c - whether it is sustainable?
2.75c per half year means a yearly distribution of about S$70m based on no of shares. Management and other operating expenses total about 12mil a year.
Investment income required to be received from investment is about S$82m per year
Looking at prior year figures – Normalised distribution from TBC is estimated to be S$22mil per year based on 47.5% share from its recent half year distribution of S$9.2million from 40% share
Normalised distribution from CXP is about S$5mil per year assuming 5% increase in distribution
Normalised HNE is estimated to fall by 10% to S$19mil due to increased competition
Total revenue of 46mil less exp of 12mil = 34mil.
distribution is just 34mil or sustainable yield of 6%
As you can see, we differ mainly on the amount Taiwan Broadband is paying out as I did not take into account the reduced debt amortization. However TBC will have to start paying debts again in 2014. So maybe 5.5cents is guaranteed till end 2013. After that, dividend paid out should be less as TBC will have to start paying debts again.
sean
Wednesday 5th of October 2011
MIIF's management fees are also determined by the amount of cash that management has on hand. Given that cash has declined the last year, management fees should rise.
Drizzt
Saturday 8th of October 2011
hi sean,
the management fees is calculated by adding mkt cap with external debts - cash holdings and firm commitments.
At 48 cents and shares outstanding of 1240 that comes up to 595 mil.plus debt of 72 mil minus of cash of 130 mil is 537 mil. 1.5% of this is 8 mil. Should all 130 mil be spent buying back shares, 130 at current average price of 48 cents will buy back 270 mil shares. MIIF will be left with 970 shares. The market cap then should price not go up is 465 mil. you still have 72 mil debt and 0 cash. That will work out to 465+72 = 537 mil. Which will still be the same.
The difference is that from 1240 shares to 970 shares, the net income shared is with a smaller shareholder group. The EPS will go up. So does the dividend payout. It is with a smaller group.
So lets take that to pay out 4 cents dividend (8.3% yield current) they require 49 mil. now this 49 mil will now pay 49/970 = 5 cents dividend (10% yield). That's a 1.7% yield bump up. Theoretically the share price should keep going up as buy back materializes.
But in this market that may be the inefficiency. If more share buyback happens below 45 cents or even 40 cents, it is as if the company is indirectly investing in assets that yields more than 10% which is a pretty good deal.
Rob van der Most
Thursday 29th of September 2011
As a starting trader I am interested in your views on investing on high dividend stocks. Great blog btw, have gotten a lot of info from in concerning the Singapore market But have got some questions: How to know or to find out the yields other then your blog? How to find out when payments of dividend occur? In a previous post you mentioned that the purchase price influences the yield, how to calculate this?
Thks,
Rob
Drizzt
Friday 30th of September 2011
Hi Rob, your purchase price affects the yield because dividend yield is calculated by dividend per share divided by price per share during purchase.
In most singapore stocks, you can get information on SGX listed company from www.sgx.com. To get the dividend per share announcement, you can go over here http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/corporate_action
divide this by your purchase share price which you can get from SGX.com and you get the dividend yield