SKT - Sky Network Television

[Shareguy]

I think It's a great result with good growth for FY23 except NPAT

$47 cents...

18000 broadband customers $8.8m revenue. Better than I was expecting.

[Cod]

Looks like the market had assumed that SKT were going to do something stupid, now that hasn't happened the market is busy working out what it's actually worth, up day IMO.

[mistaTea]

A really solid result, whopping cash return to shareholders and more importantly - the guidance for next year looks solid.

Even broadband surprised pleasantly - 18K subs is a lot higher than I think we anticipated. Plenty of scope for growth there too.

[Cod]

A really solid result, whopping cash return to shareholders and more importantly - the guidance for next year looks solid.

Even broadband surprised pleasantly - 18K subs is a lot higher than I think we anticipated. Plenty of scope for growth there too.

MT - Looks like your large holding will provide a near term large cash injection and long term decent dividends for your future, good for you sir.

[mistaTea]

MT - Looks like your large holding will provide a near term large cash injection and long term decent dividends for your future, good for you sir.

Yes, around $140K or so after taxes this year.

And if dividend is higher end guidance next year then that would be around another $40K per year which is better than a boot in the arse.

[Plata]

Decent result. Not too impressed with the revenue growth forecast for 2023 given how high inflation is, might be a revenue decline in real terms but I suppose it is better than a nominal decline. Good to see continued permanent cost savings that aren't just from reducing content spend, broadband numbers decent too. Lower cash balance than I was expecting? What's up with that?

[LoungeLizard]

Pretty solid result all-round. I'm happy with the share cancellation - makes sense from a business perspective and shareholders will get a payout, just takes longer than a special dividend.
7.3 c is at the lower end of dividend payout - 60% of free cash flow - but sensible to begin with.
I had thought the financials might not be that good this round, hence SKYS foray into trying to expand the business with MediaWorks, but NPAT of $62m is Avery good result as is the growth in customers. Even SKY broadband seems to be gaining traction.
All round - a very good result and some sensible decisions around how to return $70m back to shareholders - which in itself is pretty generous. Credit where credit due - the Board have got it right with this one.
I'd expect the SP to get a good bounce and the set of results and a return to regular dividends might attract new investors.

[Mysterion]

Pig with lipstick presentation!

Buying at these levels =



Me looking for revenue growth outside of broadband



Just lol @ them shilling the inflection point narrative again!



Forward guidance looks terrible!!!

• Increased capex!
• Increased programming costs!
• Sh!t dividend!
• Box customers churning

Average capital return because they're keep all the cash for the dark times ahead!

Capital return is likely already priced in to stock and will drop 40c in November!

Sky Sport Now the only standout performer! But only because of securing expensive rights deals. This is unlikely to generate shareholder returns in the near term.

The stock is fully priced given the uncertainty going forward and the relatively small dividend given this is a non infrastructure / intangible business model etc. This an't no safe and secure cash cow business! Blackcranes thesis of this being a high dividend paying stock offsetting other downward risks is now confirmed wrong!

Revenue will likely reverse in 2024 or 2025. More upside risk to increased capex and costs then revenue increasing. This will all hurt the bottom line post 2025. NZRU rights then come up for renewal.

Other than a takeover by WBD or Comcast, why buy this stock???

[LoungeLizard]

I get that investors still need to tread carefully when it comes to SKY and one swallow does not make a Summer, but even the most pessimistic and battle-scarred SKY followers must be feeling SOME cause for optimism by this result.
I was expecting a potential decline in NPAT - instead it's up 12% on guidance.
I was expecting a continued decline in subscriber numbers and net income - instead both have grown.
I was expecting the reported death knell for SKY Broadband - instead it might - might - be gaining some traction.
Capex will remain high until the new SKYBOX is fully rolled out, but the heavy lifting has already been done.
Programming costs and retention of content is going to be crucial - and expensive - but there's plenty of cash still in the bank and future NPAT of $50-$60m will take care of that.

The dividend is very conservative at 60% of free cash flow, but there's enough headroom to pay more in the future, considering this is a cash rich business and there will likely be a 1/10 less shares or more after the share cancelation.

I see the risks with SKY being more about bigger players moving in and squeezing SKY out, or companies like HBO etc not renewing the contracts. But even there, many of the biggest streaming companies are struggling themselves, so it may be that they will continue to sell their content to aggregators like SKY.

All up this I see this as a good day both in terms of the financial result and the decision to reward shareholders by buying and canceling shares in a tax free payment rather than by a special dividend.

[Mysterion]

I get that investors still need to tread carefully when it comes to SKY and one swallow does not make a Summer, but even the most pessimistic and battle-scarred SKY followers must be feeling SOME cause for optimism by this result.
I was expecting a potential decline in NPAT - instead it's up 12% on guidance.
I was expecting a continued decline in subscriber numbers and net income - instead both have grown.
I was expecting the reported death knell for SKY Broadband - instead it might - might - be gaining some traction.
Capex will remain high until the new SKYBOX is fully rolled out, but the heavy lifting has already been done.
Programming costs and retention of content is going to be crucial - and expensive - but there's plenty of cash still in the bank and future NPAT of $50-$60m will take care of that.

The dividend is very conservative at 60% of free cash flow, but there's enough headroom to pay more in the future, considering this is a cash rich business and there will likely be a 1/10 less shares or more after the share cancelation.

I see the risks with SKY being more about bigger players moving in and squeezing SKY out, or companies like HBO etc not renewing the contracts. But even there, many of the biggest streaming companies are struggling themselves, so it may be that they will continue to sell their content to aggregators like SKY.

All up this I see this as a good day both in terms of the financial result and the decision to reward shareholders by buying and canceling shares in a tax free payment rather than by a special dividend.

The problem is that's today's results are very backwards looking, ie they are mostly "covid boom" numbers!! This has skewed the results IMO. Market is looking at forward guidance, especially dividends and this was a huge disappointment today.

Thing's only started to go down hill in the economy from April/May as that's when inflation and cost of living narrative was pushed by the media. I suspect that the "numbers" are only being reflective now as customers come off their plans and time their cancelation with sports/content rolling over and price increasing coming through. That's why FY23 and FY24 will be difficult! I.e. the inflection point seems to be never ending!!

Sky broadband is dead! It was never alive to begin with. Quoted numbers are sh*t! Sky Broadband advertising during 2021 was heavy! Lot's of TV ads etc. Disney Plus deal etc! Now there are hardly any promotions and competitors are offering better deals. The sign up boost you get as a new service has been and gone. Hence why broadband numbers going forward are going to slow and then churn will start to happen as customers come off 12 months sign up promos. In the end, broadband just skews the revenue numbers as it's a lost making business. Overall it's just a distraction from both a management prospective and an investor prospective! 

The Neon price rise will hurt and the House of Dragon's doesn't look like it will be a major hit. I suspect that Neon subs will be weak over the next year as the cost of living bites. 

Sky Sport Now is the only platform that seems to be growing! Foxtel results also showed the same thing! This is where the growth is the only thing keep the Sky ship from imploding! If Sky can secure the rugby world cup and then renew the 2025 rugby contract, keep the EPL and then take back cricket from Spark! THEN MAYBE, MAYBE THINGS WILL TURN AROUND AND REVENUE GROWTH WILL HAPPEN! Big if they given all the competition from offshore players like Amazon, Danz, WBD etc etc.

Feb results next year will likely tell the full story. This will be post capital return! I think this is when things will get difficult and hence why management is holding a larger cash reserve because they can see this happening!

[Mysterion]

Forsyth Barr downgrades to "NEUTRAL"

[Shareguy]

Craig's say outperform

Overweight rating remains. Price Target $3.03 (prev. $3.32).
We retain our overweight rating, with our target price reducing to $3.03. Reflecting the limited clarity around long-term forecasts and consequently DCF as a measure of value, our target price remains based on a 10x multiple of our revised one-year forward EPS estimate of 30.3cps (prev. 32.2cps). The EPS reduction largely reflects increased programming/broadcasting cost forecasts. Should the capital return proceed, this represents a hypothetical ex-capital return forward PE of 8.5x (at the current share price). Key downside risks include: ability to retain content, execution of technology path,

[LoungeLizard]

Morningstar say Accumulate with a target price of $3.00
Event analysis

Sky On Track To Grow Earnings for the First Time in Eight Years

While the 15% fall in Sky's fiscal 2022 adjusted EBITDA to NZD 154 million was in line with our expectations, it belies the momentum building in the group. Moderating pay-TV revenue decreases (down 3% in fiscal 2022 versus an average of 8% for the prior three years) and permanent cost cuts (NZD 29 million in fiscal 2022, NZD 37 million in fiscal 2021) are continuing. Streaming revenue growth remains robust (three-year CAGR of 29%) and revenue from nascent Sky broadband is coming through (NZD 9 million in fiscal 2022).

All this led to solid fiscal 2023 EBITDA guidance of NZD 150 million to NZD 170 million. At the midpoint, it implies growth of 4% from fiscal 2022—the first increase in eight years. We concur with management that Sky has passed an earnings inflexion point and we've upgraded our forward EBITDA forecasts by about 30% for the next three years. The turnaround is also reflected in the dividend reinstatement, albeit the NZD 7.3 cents declared for the June-half is shy of our NZD 0.10 cents expectation.

However, we still have reservations about the maintainability of no-moat Sky's earnings in the long term. The product mix toward streaming positions the group better structurally, but dilutes margins (fiscal 2022 EBITDA margin down 440 basis points to 20.8%). Competition is fierce in the broadband-powered, on-demand entertainment segment. While Sky's "house of content" strategy acts as a competitive advantage, especially with marquee sports and WarnerMedia (House of the Dragon), it doesn't come cheap. Indeed, programming costs grew 13% in fiscal 2022 to NZD 364 million due to price escalation in key rights and are likely to rise further this year. There is also a risk of normalisation in demand, after the coronavirus bump in at-home bingeing as restrictions ease and consumers rediscover the world outside.

This is why upgrades longer-term are more modest and our fair value estimate remains at NZD 3.00 per share (or AUD 2.70 per share at current exchange rates).

[Mysterion]

Craig's say outperform

Overweight rating remains. Price Target $3.03 (prev. $3.32).
We retain our overweight rating, with our target price reducing to $3.03. Reflecting the limited clarity around long-term forecasts and consequently DCF as a measure of value, our target price remains based on a 10x multiple of our revised one-year forward EPS estimate of 30.3cps (prev. 32.2cps). The EPS reduction largely reflects increased programming/broadcasting cost forecasts. Should the capital return proceed, this represents a hypothetical ex-capital return forward PE of 8.5x (at the current share price). Key downside risks include: ability to retain content, execution of technology path,

Forsyth Barr PT is now $2.75 down from  $3.10

The results yesterday were clearly a disappointment!

Be interesting to see if management buy on market again like they did this time last year.

[Mysterion]

Morningstar say Accumulate with a target price of $3.00
Event analysis

Sky On Track To Grow Earnings for the First Time in Eight Years

While the 15% fall in Sky's fiscal 2022 adjusted EBITDA to NZD 154 million was in line with our expectations, it belies the momentum building in the group. Moderating pay-TV revenue decreases (down 3% in fiscal 2022 versus an average of 8% for the prior three years) and permanent cost cuts (NZD 29 million in fiscal 2022, NZD 37 million in fiscal 2021) are continuing. Streaming revenue growth remains robust (three-year CAGR of 29%) and revenue from nascent Sky broadband is coming through (NZD 9 million in fiscal 2022).

All this led to solid fiscal 2023 EBITDA guidance of NZD 150 million to NZD 170 million. At the midpoint, it implies growth of 4% from fiscal 2022—the first increase in eight years. We concur with management that Sky has passed an earnings inflexion point and we've upgraded our forward EBITDA forecasts by about 30% for the next three years. The turnaround is also reflected in the dividend reinstatement, albeit the NZD 7.3 cents declared for the June-half is shy of our NZD 0.10 cents expectation.

However, we still have reservations about the maintainability of no-moat Sky's earnings in the long term. The product mix toward streaming positions the group better structurally, but dilutes margins (fiscal 2022 EBITDA margin down 440 basis points to 20.8%). Competition is fierce in the broadband-powered, on-demand entertainment segment. While Sky's "house of content" strategy acts as a competitive advantage, especially with marquee sports and WarnerMedia (House of the Dragon), it doesn't come cheap. Indeed, programming costs grew 13% in fiscal 2022 to NZD 364 million due to price escalation in key rights and are likely to rise further this year. There is also a risk of normalisation in demand, after the coronavirus bump in at-home bingeing as restrictions ease and consumers rediscover the world outside.

This is why upgrades longer-term are more modest and our fair value estimate remains at NZD 3.00 per share (or AUD 2.70 per share at current exchange rates).

MorningStar have had their $3 rating for years!!! They were always above the market consensus and over time as they've stayed the same the market has narrowed to the point were all the brokers are now at the same valuation.

Today's market price is fair value!

MT needs to stop going on about how the market is undervaluing Sky as it's clearly not the case anymore!

Lack of posts by MT at the moment gives me the feeling that he's now selling or at the very least reducing his position to less insane level!