Improved utilization rates help companies move against the current trend; unique investment targets: market value: $719 million; free circulation: 39.5%; three-month average daily turnover: $400,000 Company background: Asia-Pacific Satellite provides transponder rental services to radio, television and telecommunications customers through its satellites. The company operates throughout Asia, the Middle East, Europe, Africa and Australia. The company's satellites include Asia Pacific 5, Asia Pacific 6, Asia Pacific 7, and Asia Pacific 9. The overall sector did not perform well. Over the past two years, global satellite companies' stock prices have been under pressure. We believe this is due to slower growth in demand than expected and a rise in the supply of high-throughput satellite (HTS) production capacity, which puts pressure on pricing capacity. Globally, demand for satellite services continues to increase, thanks to the more widespread use of high-definition television broadcasts and increased military spending. However, slow global economic growth also affected overall demand growth and caused demand to grow more slowly than expected. In mature regions such as the US and Europe, services provided through HTS put pressure on the industry's pricing capacity, which had a negative impact on global companies such as SES and Intelsat. Compared with other developing regions such as Latin America and Africa, the supply and demand situation in the Asia-Pacific region is better, and it is less affected by HTS. We believe that the poor performance of the overall industry has also limited APAC Satellite's stock price performance. Choosing the right development area is more important than the size of the company. For satellite operators, choosing the right development regions has become an important factor in improving business performance. In Latin America and Africa, companies with more local business will face greater resistance in the next few years due to local oversupply. For some companies with more business in regions with fewer new production capacity, their profit prospects will be more positive. Asia-Pacific satellites are also under pricing pressure due to increased supply over the past two years. However, APSAT management pointed out that the impact of pricing pressure is still manageable because the company is a regional enterprise concentrating on developing the Asia-Pacific region. 2015 was a challenging year for Asia Pacific Satellite, and the company's net profit declined year over year. The company's revenue in 2015 fell 4% year on year to HK$1.2 billion, mainly due to the decline in the utilization rate and rental prices of the company's satellites (including Asia Pacific 5, Asia Pacific 6, and Asia Pacific 7). The company's 2015 EBITDA margin was 75%, down from 77% in 2014. The company's net profit in 2015 increased 1% year-on-year to HK$514 million. Excluding confirmed impairment losses relating to non-core data centers, impairment losses from club memberships, and losses due to changes in the fair value of financial instruments, the company's basic net profit in 2015 fell 10% year-on-year to HK$520 million. In 2016, the company's operating performance improved month-on-month. As a result of the company's strong cash inflow, the company's total liabilities fell from HK$1 billion in 2014 to HK$714 million in 2015. Growth will resume in 2016-2018. Although the company is under pricing pressure, we expect the company to continue to achieve profitable growth in 2016-2018 as the utilization rate of APAC 7 and APAC 9 satellites should improve, as new uses such as flight and maritime connectivity will stimulate industry demand in the Asia-Pacific region. By the end of 2015, the usage rate of the Asia Pacific 7 satellite had increased 4 percentage points month-on-month to 65%. The utilization rate of Asia Pacific 6 remained flat at 81 per cent, while Asia Pacific 5 dropped 2.5 percentage points to 75 per cent, mainly due to the termination of some contracts to expand to the C-band. As of the end of 2015, the utilization rate of Asia-Pacific Satellite 9 was 48%. The company's comprehensive utilization rate as of December 2015 was 66%. We believe that by providing reliable services and advancing cutting-edge technology, the company will be able to minimize the pricing pressure it can withstand. Our view: Although APSAT's profit growth from 2016 to 2017 was slower than that of other TMT companies, we believe the company provides investors with a unique investment opportunity because it has no A-share listed peers. The company is an attractive choice for some investors looking to invest in satellite-related sectors. Since the industry's average 2016 price-earnings ratio and 2017 price-earnings ratio were 19.1 times and 26.5 times, respectively, the valuation of Asia-Pacific satellites does not seem expensive. Asia Pacific Satellite is the only listing platform for its parent company China Satellite Communications. If there is more news of state-owned enterprise reform, it will attract the market's attention to Asia Pacific Satellite. Catalysts: The company announced its results for the first half of 2016; merger and acquisition opportunities; news about the company's satellite utilization data; the Asia Pacific 5C satellite and the Asia Pacific 5C satellite were put into operation.