Stock pick of the month..... SKY TV (and im being serious this time)
After doing some pretty indepth analysis in my own time for past 3-4 weeks,
Findings:
- New CEO with a successful track record took over just last year (was chief financial officer at BSkyB in the UK between 1998 and 2004 when the media firm doubled its subscriber base. In 2009 to 2010 he led the successful turnaround of Ono, a leading telecom operator in Spain, which is now part of Vodafone. Just left CEO role at OSN, extremely successful leading pay TV network in the Middle East, basically a SKYTV on steroids, check out on Linkedin)
- SKYTV is in the middle of a complete overhaul of it's business model mainly focusing on transforming their technology, eg. digital streaming/online subscriptions and broadband services
- The New CEO realises the potential of the restructure and has purchased Lightbox from Spark last year to take away the competition. Recently just merged this with Neon, actually a really solid platform people prefer over netflix
- *IMPORTANT* Having secured rugby rights for next 5 years, Sky now also owns RugbyPass (Largest global rugby streaming platform), aiming to lead the international broadcasting sector in rugby, moving away from satellite so they can reach customers beyond NZ borders. When sports resume this will be a big deal
- $600 mil losses etc we are seeing in recent years was due to good will write offs of useless equity, not complete loss of earnings/cash... selling off its Outcast Broadcast assets to NEP + Securing a long term partnership for 10 years. Which is a positive, we all know SKYTV's older business model has been going downhill, now they have been able to sell part of it while securing a strong partnership
- Recent Capital raise has allowed them to pay off any remaining bank debt and now leaves them with a strong balance sheet holding an excess $118 million to withstand the storm
- Significantly increased subscribers during past year since new CEO restructured business, still in transition. So revenue may not be as great due to more affordable prices compared to their dated satilite business model but seemingly as they only began this transition mid last year the future is looking bright
- Was classified as an essential business during lockdowns leading to record streaming views and further increase in subscriptions
- Market again, has an overly bearish negative sentiment.. P/E ratio is negative!? P.S ratio 0.3!? EV/EBITDA ratio 1.5?!? Good thing, usually indicates oversold, people don't realise how undervalued SKT has become blinded by the extremely long downtrend
- Expected to release earnings/revenue with a net profit of $20-25 million post tax and expenses (A+ after 2-3 years of announcing losses.), the company appearing profitable again, many analyst only predicting a net profit of $16mil
- Recent signs of hitting rock bottom consolidating at tight price ranges for last 3-4 weeks moving out of it's extremely long falling wedge and forming an ascending triangle (those of you familiar with technical analysis will know that this is bullish if conditions are right). Mixed in with the right fundamentals^^ this is a sign of a very strong reversal pattern.
- Mass insider buying recently occurring including many directors, and share purchases from the CEO himself of approx 837,620 shares. With no one selling recently. Some even purchasing at prices of $0.17-18 per share
- Recently just restated $200 MILLION banking loan until 2023, this is a strong vote of confidence we should consider. To get this they would have had to prove to the banks their future business model is realistically successful... they would have had to hand over all of their financials as well as earning projections based on various scenarios, including worst cases. And the syndicate of banks would have had to believe the projections to be realistic + their downside to be minimal. Banks loaning out this quantity of money are not stupid, these dudes love money and risk management. Do you believe a bank would give out a flexible loan limit this high to a company truly worth a market cap of $245mil? Yep that's the market cap of SKT right now, equivalent market cap of many companies on NZX that generate less than $1mil earnings.
In short, there is a much needed new leadership team, they have a new vision, they are restructuring their business in the right direction, they've paid off all debt with a considerable amount of cash in hand and gained flexible loaning, people again have an overly bearish sentiment (Example> Vista Group), many people do not realise they will be announcing their upcoming report soon with an estimated NPAT of $20-25 million FY20. First time profitable in 3 years and strong signs of hitting rock bottom. The CEO Martin Stewart has accomplished a hell of a lot in the single year he's been here
Enough said
Report release on September 10th
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(20min delay)