Originally Posted by
Baa_Baa
Here's their words:
Recommendation impact (last updated: 29/06/2021)
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Event analysis
Revenue Reaching for the Sky but Earnings to Remain Grounded
Sky's three-year financial targets to fiscal 2024, if achieved, would present upside to our already positive intrinsic assessment. The goal of stabilising satellite revenue during the period is a year or two ahead of our thinking, the 15% to 25% CAGR aspiration for streaming revenue exceeds our current 12% forecast, and the broadband initiative (not in our model yet) could add NZD 90 million to the top line by fiscal 2024. The result is a potential revenue base of NZD 800 million in fiscal 2024 versus our current NZD 600 million forecast.
Unfortunately, the bright revenue picture is blurred by an uncertain outlook for costs snapping back from COVID-19-related rights relief, and investments needed to execute the strategic plan. EBITDA is projected to fall for two to three years from management's projected NZD 180 million-plus in fiscal 2021. The trajectory is in line with our current expectation, but the key mystery is where Sky's fiscal 2024 EBITDA will end up relative to our NZD 110 million forecast.
As an illustration, the current guidance for fiscal 2021 implies second-half EBITDA of NZD 66 million, or roughly NZD 130 million annualised. Our current fiscal 2024 EBITDA forecast of NZD 110 million would then equate to an average decline of 16% from fiscal 2021. If proven to be on the mark, it would imply profitless growth from all the revenue/broadband initiatives, or that they are essential investments in adjunct services just to stabilise overall subscribers and earnings.
We leave our forecasts largely intact. It may be tempting to blindly input management's financial targets into the model, but details from the investor day warrant a longer deliberation. In any case, our unchanged NZD 0.30 fair value estimate (AUD 0.28 at current exchange rates) already implies material upside from Sky's current stock price. And the no-moat-rated group has attracted "a number of unsolicited approaches around potential transactions" over the past year according to management.