By Jenny Ruth
Friday 29th April 2011
|Text too small?|
Sky Network Television is in an unassailable position of being the only pay TV operator in New Zealand and has strong earnings growth prospects so its shares deserve to trade at a premium to its global counterparts, says Nachiket Moghe, an analyst at Aegis Equities Research, which is owned by Morningstar.
He has raised his forecast net profit for Sky from $139.6 million to $147 million for the year ending June 2012 which would represent a 21.5% increase over his $121 million 2011 forecast.
Moghe says the pay TV market in New Zealand is relatively under-penetrated compared to other OECD countries so there is significant potential for subscriber growth and new technologies such as personal video recorders provide excellent long-term growth opportunities.
The rollout of MySky will mean higher upfront investments but profitability should impved once revenues from MySky ramp up, he says.
"The company will look at giving cash back to shareholders in the form of either a material rise in half-year dividends or a one-off bonus dividend once bank debt is repaid," Moghe says.
"Given the company's strong balance sheet and good free cash generation (generally in line with net profit), we think it can afford to lift dividend payouts from 55% to 60% to perhaps 80% without any trouble."
Recommendation: Hold (he values the stock at A$4.33 [NZ$5.80]).
No comments yet
Sky TV let off on alleged past breaches of competition law
Sky TV board adds Snakk's Handley, ex-SAP exec McBride
Sky Network increases profit, dividend as it battles increased rivalry
TVNZ, Sky TV to wait up to 6 years for Igloo to breakeven, state broadcaster says
UPDATE Murdoch's News Ltd to sell Sky TV stake for $815.3M in discounted placement
Murdoch's News Ltd to exits Sky TV stake in sale reported to be at discount
Sky TV lifts 1H profit 9 percent as subscribers spend more, migrate to My Sky
Sky TV makes $124.5 mln special dividend to distribute tax credits
Todd Communications ends 22-year interest in Sky TV, sells stake
Sky TV content agreements need more investigation, regulator concludes