This could end up being the best performing stock this year in the local bourse
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This could end up being the best performing stock this year in the local bourse
$3.77 per share. Forecast EV/EBITDA of 4.0x + cash on hand. And, the insto's probably know this and will keep creeping.
Up 5c to $2.68
I think the sale of the property was mostly factored in so I wouldn't expect big movement before Xmas. Next jump will be in the New Year in anticipation of capital return in Feb.
Yes a lot of merit to your thought process.
If they are angling for M&A (which I think is right for Sky long term) then making the moves they are currently making to lift the SP is exactly the right approach. Foxtel have been doing exactly the same thing so that they can maximise their IPO valuation.
If I was an interested party (be it PE, a telco, Foxtel etc) I would want to make a compelling offer to buy Sky before they do any form of capital distribution to shareholders.
Turning around any company is a hard task and most company directors & management simply do not have the energy or time & resources to effect turnarounds unless they can get a company really really cheap.
More so especially in a pandemic environment so it is not surprising to me that Sky was not an attractive acquisition or merger candidate while it was struggling to get traction.
And the fact that Sky turned down a $2.30 offer reinforces what I believe that the directors of Sky felt - it was too cheap a price.
Now is when the real interest will begin with momentum on Sky's side.
Poor Ogg - that $100k he made will get swallowed up in therapy...
Agreed- more than ever, SKY is likely to be an M&A target now that it is a profitable company again with a clean balance sheet. And whoever interested is likely to make an offer before the capital return to investors. No downside either way to investors whether an M&A goes ahead or not - Sp will be $3 come February, or a takeover offer will be in the region of $4.
Yes, takeover would really need to be in the $4 region now - a 50% premium to the current SP which is 'usually' the top end I believe. Though sometimes organisations could go a little higher if they see big value.
$4/share would be a market cap of $700M, but an EV of only $580M by March (if my FCF assumptions are correct, and Sky hold $120M by then).
$580M represents a PE multiple of 14.5 based on low range GAAP earnings. The PE is only 12 if we used top end guidance (48M).
For the right company, nabbing Sky for a PE of 12-14 is not bad going at all - while still enabling existing shareholders to realise a 'fair value'.
It really depends on what the SP is.
If the SP is sub $3 then an on market buyback is probably still the way to go (a no-brainer). Ultimately it depends on what you think Sky is worth. If The Board think Sky is worth $4/share then they should be happy to continue buying back stock even if the SP lifted to $3.50.
But if the SP got to a level where they thought they would be buying back stock at or above intrinsic value, then a tax free capital return could look better.
This is what they are getting advice on.
But while the SP has come up, it is still low relative to the business prospects. So I am picking a sizeable buyback.