SKT - Sky Network Television

[Mysterion]

F**k, I still can't believe what I'm reading!

I just have that gut feeling the takeover will come now at $3 and some insider has bought in and is gonna make an easy $250k in a couple of weeks

[mistaTea]

F**k, I still can't believe what I'm reading!

I just have that gut feeling the takeover will come now at $3 and some insider has bought in and is gonna make an easy $250k in a couple of weeks

The future is more uncertain than ever mate, and Management/The Board have destroyed a lot of shareholder wealth.

If someone was keen to buy Sky it would have happened by now. Could a takeover still eventuate at some stage? Sure it could - but I wouldn't hang on to shares in any company just because I am hoping a greater fool comes along later.

Even if the market cap drops to $300M after the capital return, and people start to think more about future dividends and what yield Sky should command to factor in risk premium etc...

Well, someone would still have to pay about $400M to buy her out.

Who is going to pay almost half a billion dollars for Sky now?

If they hang on to HBO-Discovery they will have to pay through the nose for it. HBO-Discovery seem keen to launch a combined service, so maybe Sky get co-exclusivity.

Sky should keep rugby, but at a cost.

Meanwhile, Disney+ is growing, Amazon Prime has an amazing array of content and is only $8/month. Sky is still hanging in there...but the future is murkier than ever now.

So who would buy her?

A telco? Nope. They are better off just doing wholesale content deals and bundling it in that way. Spark have tried to enter the content wars at least 3 times now and have been burned every single time. Mark Callander way too smart for that shite. He was warm to the idea a few years back, but I think everything has well and truly moved on from there.

Foxtel - buy Sky and do a big trans-tasman thing? Some merit to the idea, but their owners want to sell out and move on so this is unlikely.

Private Equity? They have the cash...but how confidend are they that they can make a real difference and extract value from Sky? Look at the Foxtel owners...they have done a bunch of good stuff to transition Foxtel to streaming etc and are unable to sell the business!

Nobody is coming to bail shareholders out mate.

[LoungeLizard]

It has taken me ~6 weeks, but I have just completed selling the bulk of my Sky shares.

I have sold 97% of the shares I owned, and now hold a very modest amount of shares. I only hold ~$25K worth of shares now - enough to keep me interested in how events unfold for Sky over time, but not so much as to be particularly worried either. Also consider that at the end of November, Sky will return $4K of that to me in cold hard cash.

Well, it's been quite a ride and I can't blame anyone who has lost confidence in SKY, it's strategy and it's Board.

Would be interested to know though why you didn't hang on until the return of capital, given that would have been quite significant given your prior holding. Do you think it's priced in and the SP is going to drop by that amount?

I continue to be conflicted over staying the course until the cap return and share purchase but also knowing there could be a stampede for the exits after that takes place.

Why have I sold out?

Well, it is my view that the current market price for Sky is more than fair. Probably overvalued actually.

Market cap = $410M. Once you subtract the $70M cash payment, Sky's operations are valued at $340M.

Even if we assume that Sky pay the top end dividend guidance of $23M next year, a $340M market cap would be a 6.8% yield. When you consider that Spark is currently priced at a 6.3% yield, that is truly astounding.

I have no idea what the Sky SP will do over the next year, but I do feel that the current price is more than fair given:


Earnings outlook beyond a year or so is very murky
Big renewal deals are coming up soon - rugby and HBO. Winning them will come at a big price.
Broadband uptake is slow
STB rollout is still yet to happen. The rest of the cash in the bank will be spent on this new box.
Now that it has taken Sky so long to launch a new box, the uptake will be less than if they did this a few years back given Smart TV's are pretty damn good now. It is still an important part of their tech roadmap, but will have less impact now than it would have in the past.


When all is washed up, on paper I am probably down about $40K on this investment. However, all is not lost:


By hanging on to 10K shares I have not actually realised a loss yet. I get $4K in November, which reduces my loss to $36K. Future dividends and possible upward movement of the SP in the future (if a takeover ever eventuated, for example) could well mean that I get all my momey back in the future.
I still get to own a tiny slice of a business I am interested in, but can 'set and forget' now.
The learnings from owning Sky over the past few years have been absolutely invaluable to me.


Murphy's Law dicated that next week a takeover offer will present. That's ok if it does - I don't have a crystal ball, and holding while hoping a greater fool will come along to buy your shares is hardly investing. I have sold my shares, and feel pretty damn good about it.

Good luck to everyone still hanging in there. It will be interesting to see how this play out for Sky over the next few years!

[Mysterion]

The future is more uncertain than ever mate, and Management/The Board have destroyed a lot of shareholder wealth.

If someone was kene to buy Sky it would have happened by now. Could a takeover still eventuate at some stage? Sure it could - but I wouldn't hang on to shares in any company just because I am hoping a greater fool comes along later.

Even if the matket cap drops to $300M after the capital return, and people start to think more about future dividends and what yield Sky should command to factor in risk premium etc...

Well, someone would still have to pay about $400M to buy her out.

Who is going to pay almost half a billion dollars for Sky now?

If they hang on to HBO-Discovery they will have to pay through the nose for it. HBO-Discovery seem keen to launch a combined service, so maybe Sky get co-exclusivity.

Sky should keep rugby, but at a cost.

Meanwhile, Disney+ is growing, Amazon Prime has an amazing array of content and is only $8/month. Sky is still hanging in there...but the future is murkier than ever now.

So who would buy her?

A telco? Nope. They are better off just doing wholesale content deals and bundling it in that way. Spark have tried to enter the content wars at least 3 times now and have been burned every single time. Mark Callander way too smart for that shite. He was warm to the idea a few years back, but I think everything has well and truly moved on from there.

Foxtel - buy Sky and do a big trans-tasman thing? Some merit to the idea, but their owners want to sell out and move on so this is unlikely.

Private Equity? They have the cash...but how confidend are they that they can make a real difference and extract value from Sky? Look at the Foxtel owners...they have done a bunch of good stuff to transition Foxtel to streaming etc and are unable to sell the business!

Nobody is coming to bail shareholders out mate.

Basically yeah

I could see all this happening 9 months ago mate!

However, if the economy turns next year back into a low inflationary environment it may make sense for either WBD or Comcast to pay $400m or $500m for sky as a way to buy market share and grow inorganically. Sky's market position in NZ is still solid but it can't deliver decent returns to shareholders under it's current structure. A takeover has to come but the question is when and for how much.

[LoungeLizard]

Any reason you didn't wait for the cap return before selling out MistaTea? Priced in? Avoid the stampede for the exits in November? I'm conflicted over whether to bail as well, or stay in until November and see how things pan out. Watching and waiting isn't the best approach with SKY though 

[mistaTea]

Any reason you didn't wait for the cap return before selling out MistaTea? Priced in? Avoid the stampede for the exits in November? I'm conflicted over whether to bail as well, or stay in until November and see how things pan out. Watching and waiting isn't the best approach with SKY though 

Capital return is priced in. So is the dividend.

I took the view that the market cap is currently high based on a future yield evaluation when comparing to more stable businesses like Spark.

Things will remain very choppy for Sky over the next few years.

I still kept a small parcel - 10K shares. Will be watching events as they unfold. Might sell the rest at some stage too - will see how things go.

[Mysterion]

Any reason you didn't wait for the cap return before selling out MistaTea? Priced in? Avoid the stampede for the exits in November? I'm conflicted over whether to bail as well, or stay in until November and see how things pan out. Watching and waiting isn't the best approach with SKY though 

One would think things will be fine until at least Feb next year.

I don't see much happening or anything that could happen that would result in a massive downgrade over the next few months.

The uncertainty is more earnings over the next 2-3 years and securing rights deals.

If it were me I'd hold for a few more months. Takeover could come straight after the capital return.

(note: above is my opinion and not financial advice.)

[Mysterion]

MT selling out of Sky...

[Mysterion]

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!

Aug 26, 2022, 02:27 PM

[Mysterion]

What was your average sell price MT?

[mistaTea]

What was your average sell price MT?

Not sure. It ranged from $2.35 to $2.60.

[LoungeLizard]

Maybe SKYs "strategy" is a final mea culpa towards Shareholders by way of a cap return, then afterwards as the SP drops towards $2 they accept a $2.50 per share offer that is already on the table. That would work for me. Pity it's (probably) never going to happen.

[mistaTea]

Should have dumped all my shares on results day for $2.75 a pop.

But I was too busy rooting missusTea.

[Mysterion]

Not sure. It ranged from $2.35 to $2.60.

Decent.

If the takeover doesn't come or if it's is $3 or less, then that's the right decision.

If the takeover comes next year at $3.50 then it's still probably the right decision.

It would suck tho if a takeover came at $3 next week or next month.

[Mysterion]

Should have dumped all my shares on results day for $2.75 a pop.

But I was too busy rooting missusTea.

Does she know you're down $40K?