Taiwan licence re-zoning has so far been feared as a competitive threat.
However, our analysis shows that a Taichung expansion will be hugely
positive for TBC's cash flow. Expansion will turn APTT into a
high-yield growth play, which should catalyse current low valuations.
We think APTT is likely to expand
into greater Taichung and this will
lead to higher dividends from FY16
on. Maintain Outperform with a
higher target price, still based on DCF
with COE of 11.0% (10.2% previously)
and LTG of 1.0%. We keep FY13-14
distributions unchanged and lower
FY15's by 4%. However, from FY16
onwards, distributions are raised
3-26%. The prospect of growth should
lead to a re-rating, in our view.
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