Friday, 11 December 2015

Thoughts On APTT's Price Plunging...

I posted two posts about APTT before. 

Analysis of Asian Pay Television Trust (APTT)- Why it is a trap for investors!




APTT's share price has dropped 5% today, 20% in one months, or 34% since IPO.  In Nov, the counter was still traded around 0.8. Yesterday its closing price was at 0.68. Today it plugged another 5% to 0.64. There is no big-event news release recently. Nor are there any profit warning issued by the company. The risks, such as interest rate rise, NTD depreciation, slower growth, increasing cost, are not unknown and are not proportional in explaining the price plunge. 

1. 

So what the hell has happened? 


Firstly, you need to know that APTT is not an average telecom company. Its main business is cable TV in central Taiwan, that's it. Simply put, a small company in an arguably sunset industry (cable TV).   

Secondly, it's highly leveraged, as are other telecoms worldwide. 
Thirdly, it's high dividend pay out is partially funded by debt. The real dividend(without debt funding) for 2015 should be 5.5c, not 8.25c, according to KGI, a Taiwanese brokerage firm. Btw, KGI has price target of 0.75; DBS has a price target of 0.77 down from 0.8 --- fresh report released on 02 Dec 2015. Well, today closing is at 0.64. 
... 
You can continue the list of points that argue against APTT. 

However, APTT is NOT a fraud. It is a solid business that has run for many years, with stable operating revenues and generous consistent dividends. Yes, it uses financial engineering and one can work out and argue that its current dividend level is not sustainable for ever. ( what is for ever? )  But it is not a fraud. APTT's business is transparent and has no involvement in manipulation of accounting and reporting, unlike those counters, you know Olam, Noble, China MINZHONG, or Silverlake Axis,  that have been divulged by short-selling agencies. 


Even if it cuts dividend down to 5.5 cents/year. At today's closing price, it still yields 8%+. Still decent.  Since its debt is fixed rate until 2017, I personally believe that APTT management can and will keep annual dividend at 8c. If that is the case, you will get yield of 13%+. More than OK?  Well, pls be cautious. High yield almost always indicates high risk. In general, high yield is not sustainable thus not a good investment for long term. Take a look at APTT's Business Trust brothers:  Rickermers Maritime, Accordia Golf Trust, after dividend cut, look at how their price performed. 



2. 
So what's next ? Will APTT's price keeps the downtrend to move lower and lower almost endlessly like Noble? 

Personally I doubt that. Unlike those counters who are having fundamental issues or facing declining industrial cycle,  APTT is a stable income-generating investment vehicle after all. It has solid recurring income and pays high level of dividends. Unless its fundamental turns into ashes(extremely unlikely), there are enough reasons to believe that the panic selling will halt when its price is too cheap for serious investors to ignore. But what is the price level then? OK. Let's put away those pedantic analysis reports with P/E. P/B ratios, DCF, forecasting... 


Let's do a little bit of primary school math with a little psychology here. 


IPO price is 0.97. Dividend since IPO till date is 0.22, so for IPO subscribers ( assuming no trading gain/loss in between), break even price is 0.97-0.22 = 0.75. 

In the last trough in Jan 2014, the bottom closing price level is 0.72. The aggregate dividend  from then till now is 0.14. So the break even price for those investors are 0.72-0.14= 0.58 cents. 

So price levels around 0.58 and 0.75  will be important levels to watch. Breaking down of 0.58 implies that EVERY Investor since IPO ( including the lucky investors who fished the bottom in last trough) who have ever bought and held this counter to date is at paper loss with dividend (ignore trading in between)! At this moment, any rebound would find it hard to exceed  0.72 -0.75,  the last support level ( turning resistance now). If the price stops plungging. It is likely to be traded range bound between 0.58-0.72/5. Breaking down of 0.58 would be really too cheap to bypass. ( Disclaimer. not forming any advise) 


Ok. Math done. A little psychology for fun. 


At this moment, there are a few types of investors. 

A.  Those who had bought at hopelessly high price level in history. 
        A1:  Along the path of downtrend, many probably had given up and left. Accepted the painful facts.   
       A2: Those who are still sticking around are interesting. 
              A 2.1: They could be big-money who does not care so much, i.e. APTT is only a negligible percent of their portfolio.  " Emm...unbelievable... nvm, only a small hole, see what's next " -- Temasek is likely this type. 
              A2.2: They could be die hard value-investing fundamentalists who are convicted and fearless. " Market panic ! The mass public are having knee-jerk reaction. The price will recover to its value some day!  anyway,  I invest for income. Don't care about the price move."   
               A2.3: They could be outright desperate. " Shit. I just hold. Let me see how low the price can go!" 

B.  Those who bought at relatively low price level in history and held for some time. Their break even price is likely <=0.6. (maybe still a little profitable to date). These investors are very disappointed and are getting more and more nervous. Any break down of their break even price will trigger a wave of protective selling. 

       " OMG, how come like this hah? Should I get out of this trap before too late? Lucky did not load at high price." 

C. Those who had bought recently for its lowering price. Mostly are retail investor who just like to catch falling knives as they have the an investment mindset of collecting cheap goods. ( 捡便宜货)

      C1: Some are now regretful and angry! " What the fxxk, it plunged just after I buy! What the hell! I will get out once price rebounds."   
      C2: Some are denying.  " If it drops more, I buy more" Typical losers. 

D. Outsides who wish to enter at the price that is too cheap to ignore. They are tempted and some are opportunistic. 

      D1: " This is too good an opportunity to forgo. I will load some and hold for long term gains, even just hold for the income, it is not bad lor. Anyway the risk now is much reduced, while there is upside to look forward to" 
      D2: " The price is dropping too fast and too low level. Let me buy some and see if it can rebound. Should it drop again. I go away. " 

E. Short sellers who missed the plunging. They are anxious and hopeful. 

      "Godly, I know the price should go down. Shoot! Missed it. But maybe not chasing low now. I will short it when price rebounds" 

F. Short sellers who already successfully short at high price and sit on handsome paper profits. They are both happy and worrisome. 

     "I will carry on, let the trend continue and short this counter to death!" " well,...what if price rebound? better not let the dead duck fly lor!" " mmmm...I close short position now, If the price rebound, I short again.." lol 


With all the type of investors, the following scenario could happen. 

When the panic selling stops, and price are stagnant in the current low level for some time. Type F is likely the first group to move as human nature is that it is easier to take profits and than to take loss. 


 When type F starts to buy back to lock in profits. The price will rebound. Type D will contribute too. 


But the rebound will face pressure.


Type E and F looks for rebound as an opportunity to short again while type B and C1 are looking for a rebound to get out. Together they will form selling pressure to resist price rebounding to higher level, which implies that the price plunge may stop for a mild rebound, and then will be traded range bound there after. Then the price will find its way to break out again, could be up or down, depends on the market force. Another cycle starts...



3. 

Another fresh lesson learnt for dividend income investment.  
Do not be tempted just by high yield alone. Focus on dividend quality for long term holdings!  


7 Common Faults in Dividend Stock Investing

1 comment:

  1. Ass...saya tidak menyanka kalau saya sudah bisa sesukses ini dan ini semua berkat bantuan MBAH RAWA GUMPALA,saya yang dulunya bukan siapa-siapa bahkan saya juga selalu dihina orang dan alhamdulillah kini sekaran saya sudah punya segalanya,itu semua atas bantuan beliau.Saya sangat berterimakasih banyak kepada MBAH RAWA GUMPALA atas bantuan nomor dan dana ghaibnya,alhamdulillah kini saya sudah bisa membuka usaha kembali yang dulunya pakum karna masalah faktor ekonomi dan kini kami sekeluarga sudah sangat serba berkecukupan dan tidak pernah lagi hutang sana sini,,bagi anda yang punya masalah keuangan jangan sungkan-sungkan untuk menhubungi MBAH RAWA GUMPALA karna insya allah beliau akan membantu semua masalah anda dan baru kali ini juga saya mendaptkan para normal yang sangat hebat dan benar-benar terbukti nyata,ini bukan hanya sekedar cerita tapi inilah kisah nyata yang benar-benar nyata dari saya dan bagi anda yg ingin seperti saya silahkan hubungi saja MBAH RAWA GUMPALA di 085==316==106==111




    (((( BUKA BLO DANA GHAIB DAN NOMOR GHAIB MBAH RAWA GUMPALA ))))







    Ass...saya tidak menyanka kalau saya sudah bisa sesukses ini dan ini semua berkat bantuan MBAH RAWA GUMPALA,saya yang dulunya bukan siapa-siapa bahkan saya juga selalu dihina orang dan alhamdulillah kini sekaran saya sudah punya segalanya,itu semua atas bantuan beliau.Saya sangat berterimakasih banyak kepada MBAH RAWA GUMPALA atas bantuan nomor dan dana ghaibnya,alhamdulillah kini saya sudah bisa membuka usaha kembali yang dulunya pakum karna masalah faktor ekonomi dan kini kami sekeluarga sudah sangat serba berkecukupan dan tidak pernah lagi hutang sana sini,,bagi anda yang punya masalah keuangan jangan sungkan-sungkan untuk menhubungi MBAH RAWA GUMPALA karna insya allah beliau akan membantu semua masalah anda dan baru kali ini juga saya mendaptkan para normal yang sangat hebat dan benar-benar terbukti nyata,ini bukan hanya sekedar cerita tapi inilah kisah nyata yang benar-benar nyata dari saya dan bagi anda yg ingin seperti saya silahkan hubungi saja MBAH RAWA GUMPALA di 085==316==106==111

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...