Should Asian Pay Television Trust’s (SGX:S7OU) Recent Earnings Worry You?

When Asian Pay Television Trust (SGX:S7OU) announced its most recent earnings (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Asian Pay Television Trust has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see S7OU has performed.

Check out our latest analysis for Asian Pay Television Trust

Was S7OU’s recent earnings decline indicative of a tough track record?

S7OU’s trailing twelve-month earnings (from 31 March 2018) of S$24.92m has declined by -47.58% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 4.85%, indicating the rate at which S7OU is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and if the rest of the industry is experiencing the hit as well.

Over the last couple of years, revenue growth has not been able to catch up, which implies that Asian Pay Television Trust’s bottom line has been driven by unsustainable cost-cutting. Eyeballing growth from a sector-level, the SG media industry has been growing its average earnings by double-digit 15.74% over the past year, and 10.98% over the past five years. Since the Media sector in SG is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as mm2 Asia, Singapore Press Holdings and . This means that whatever uplift the industry is profiting from, Asian Pay Television Trust has not been able to leverage it as much as its industry peers.

SGX:S7OU Income Statement Export July 27th 18
SGX:S7OU Income Statement Export July 27th 18
In terms of returns from investment, Asian Pay Television Trust has not invested its equity funds well, leading to a 2.18% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.17% is below the SG Media industry of 5.83%, indicating Asian Pay Television Trust’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Asian Pay Television Trust’s debt level, has declined over the past 3 years from 2.90% to 2.28%.

What does this mean?

Asian Pay Television Trust’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Generally companies that endure a prolonged period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry expansion and disruption. I recommend you continue to research Asian Pay Television Trust to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for S7OU’s future growth? Take a look at our free research report of analyst consensus for S7OU’s outlook.
  2. Financial Health: Is S7OU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.