What 2 or 3 years?
Divvy in Feb will push SP up right away.
And you should want that even in the takeover scenario. Stronger SP gets us a better deal.
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Sophie just needs to have a korero with the Board about resuming dividends to get the SP back up so that she has more options moving forward.
Sky have 35m in cash plus another 50m or coming from the property sale. That's plenty to invest and grow the business. Dividends can, and should, be paid out of NPAT which at 10c per share would only be 17.5m per year from an expected profit in 2022 of around 30m. Do-able. Easily.
Only a couple of months ago SP was 2.15 from investor (Osmium) interest and a buzz surrounding the consolidation. Part of that interest and buzz was that Sky had seemed to have turned the corner, and was an investable company again. Imagine if they had declared a return to dividend not long after! You would have seen SP approaching 2.30 which you say you would take if that was a takeover offer. Point being you don't need to pray for the cavalry to come, to get the sort of price you would take. There's no volume at the moment because the Board aren't offering anything - they have gone back in their shells, but it wouldn't take much (a 10c dividend) to light the fuse again.
Dividends make the world go round.
In New Zealand.
Checking in here after a week or so away
Anything exciting happened…have I missed anything important.
Share price trending dowm I notice
FY22 EBITDA guidance = $122.5M mid range.
CAPEX will be $55M mid range ($15M stay in business, $15M 'Enhance' initiatives' and $25M 'Growth').
I advocate that the $25M Growth projects (which will be things like Sky Mobile) should be funded through borrowing to maximise shareholder returns.
If so, then only $30M CAPEX need come from Operating cashflow.
$122.5M EBITDA - $30M CAPEX - $20M tax - $30M lease costs = $42.5M FCF.
An 85% payout ratio would be ~$36M ($18M payment every 6 months).
If they have reduced the s/o to 150M after returning proceeds from the property sale to shareholders tax free then this would be a total dividend of 24c/year over two instalments.
24c total dividend at a high yield of 8% would still be ~$3/share.
And Sky would still have ~$40M cash in the bank for a rainy day ($6M left over FCF + $35M cash already in the bank).
I repeat...it really is not rocket science. This is what BlackCrane are waiting to get to.
Revenue and GAAP earnings are expected to grow from FY23...so the payout amount should be sustainable if not grow.
If Bowman and co can give the market more certainty around dividends, and implement one by Feb (after the capital return), start using some debt to finance growth initiatives...and can get the SP well above the $2.50/share offer we would have likely ended on with PE then fantastic. He can hold his head up high again and he will have some very happy shareholders.
Broadband and the new SKyBox will eat up a lot of cashflow in the coming year. Both require large upfront costs for Sky, which are recouped over the long term by monthly customer installments. Both initiatives won’t be cashflow positive for a couple of years at least, especially if they are successfully growing like we want them too.
If sky got into mobile it could be even worse of a cashflow suck depending on the business model. They definitely don’t have the billions required to install a national network and obtain the necessary spectrums, so only way they could do it is by partnering with an existing network (Spark/VodaFone/2Degrees) - which means operating as a low margin reseller - either as an MVNO with its own sky branding, or more simply just bundling one of the networks mobile offerings and skimming a percentage (which probably is the best option).