I like your thinking, and you give a good enough approximation for the worst case scenario (based on projections given by the company).
Another way to look at this would be to use Net Operating Profit After Tax (NOPAT). We have two scenarios, based on the different GAAP projections.
- NOPAT = $37.5M GAAP Earnings + $120M D&A (assumed) - $40M lease liabilities (I thought it was a bit lower than that, but lets stick with $40M) = $117.5M
- NOPAT = 45M GAAP Earnings + $120M D&A (assumed) - $40M lease liabilities = $125M.
To get an idea of Owner Earnings, you would usually deduct your estimate of 'keep the lights on' CAPEX. However, we know what the total CAPEX ('keep lights on' + growth initiatives) will be, so we can use these figures to get an estimated range of funds theoretically distributable to shareholders at the FY results.
To do this we subtract the high end CAPEX from the lower NOPAT, as well as the lower end CAPEX from the higher NOPAT.
So:
- $117.5M = $55M = $62.5M (near enough to your estimate; and
- $125M - $45M = $80M.
It is my view that the figure will end up being somewhere in the range of $70-$80M at the FY21 results.
If these underlying earnings continue, then a dividend of 2c - 4c (total) should be possible, depending on what the future CAPEX requirements are and appetite to draw on the $200M facility to help fund it.
2c - 4c per share would be a payout of ~$35M - $70M. I doubt they go as high as $70M even in the best case scenario, but I think they can return more than $35M to shareholders.
So a total dividend for the year when a dividend is declared of 3c (~$52M) is entirely possible.
That would theoretically push the SP up to 30c - 40c depending on what kind of yield the market expected from Sky. As we well know, what 'should' happen and what actually happens with Sky's SP are usually very different though!
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