Sky Network Television

By Dan Stratful

Tuesday 31st January 2012

Sky Network Television (NZX: SKT ) shareholders enjoyed a 25c special dividend for the year ending 30 June 2011 (FY11) as SKT returned surplus cash to shareholders, and the market continues to expect that this may continue.

SKT has recently signed a joint venture with TVNZ whereby the duo will provide a new pay television service. SKT will hold a 51% stake in the new service while TVNZ will hold the remaining 49% and the new service is expected to be launched in the first half of 2012.

The JV with TVNZ is likely seen as a long term initiative to make it more difficult for competitors to launch a new service in NZ, however the new service may cannablise SKT’s existing services in the near term, as the new subscription service is thought to be cheaper than SKT’s current packages.

More details on pricing and services will be released in coming months and it may also provide users access to digital technology and Ultra Fast Broadband (UFB).

Despite rising costs in some areas of its business, SKT is benefitting from a strong NZD (particularly against the USD) as most of its programming costs are in USD.

SKT expects a net profit of $120 - $125 million in the year to 30 June 2012 (FY12) compared to $120 million in FY11, and the FY12 forecast is slightly lower than what the market was expecting, as it had expected a profit lift as additional subscribers joined for the Rugby World Cup.

Further special dividends could be paid in FY12, and the announcement of which will provide support for the stock.

Status: GROWTH BUY

SKT’s shares today traded at $5.22

For sharemarket and fixed income trading enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.

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