SKT Sky Network Television Limited.

[Sideshow Bob]

Sky has released guidance for FY25 including:

- Revenue of $760m to $785m
- EBITDA of $150m to $170m
- NPAT of $40m to $55m
- Capex of $55m to $70m
- Dividend of at least 21 cents per share.

[winner69]

Free Cash Flow $23.7m pretty impressive

[Bjauck]

Free Cash Flow $23.7m pretty impressive

Underwhelming Revenue increase at below the inflation rate. Although EBITDA increase was at about the inflation rate. It could have been worse. The Olympics came after the balance date though.

[flyinglizard]

In DCF model, free cash flow increases and discount rate drops will boost up the valuation result..... I assume there was no growth in future 5 years, the result of formula still shows SKT significantly undervalued.

[LaserEyeKiwi]

Both Sky Box & NEON hemorrhaging users - Sky continues to essentially be whittled down into primarily a reseller of NZ rugby content, with a little side helping of an increasingly dire HBO, if it loses NZR then its game over.

[winner69]

In DCF model, free cash flow increases and discount rate drops will boost up the valuation result..... I assume there was no growth in future 5 years, the result of formula still shows SKT significantly undervalued.

When I do that calc I get $2.88

Spooky eh

[flyinglizard]

When I do that calc I get $2.88

Spooky eh

with updated FCF?

[Leemsip]

Quite a big difference between FCF $23.7m and NPAT $49m. I usually expect these 2 measures to align somewhat, and with SKT they should do at a high level as depreciation $83m (in NPAT but not in cash) is pretty close to capex $88m (cash but not in NPAT).

If they are only earning $23m FCF on a $388m valuation its not a screaming buy, but the NPAT number of $49m is awesome. So which is the right number? Seems important. as there is a $26m gap.

After half and hour of investigation of the annual report, my conclusion is that:
- Even though depreciation expense was $83m this is light compared to actual money out the door for capex ($88m) and lease cost principal payments ($26.7m). The lease costs happen every year, so recurring and should be factored in.
- depreciation expense will increase in future years and decrease NPAT, as the new assets take the whole asset base higher.

So on this basis, the free cashflow measure is more representative and we are looking at a P/E of 16 on a no growth company. Expensive

Looking ahead
- capex will decrease in future years according to the company by 20-30% or so, which is $18- $27m odd. If we believe this, then 2025 will be more like $50m NPAT and $50m FCF. So a P/E of 7.5, cheap as bro and a buy.

Overall I like where this is going, trust management to get capex under control and back down to 7-9% of revenue, to control costs (made a good showing of this in 24), and keep customers. Im happy and believe they can increase dividends to 30c. Im holding and relaxed.

[Leemsip]

6.5% fully franked dividend is decent as well.

30c divi in 2026 will be a fully franked 10.5%!

[LaserEyeKiwi]

Quite a big difference between FCF $23.7m and NPAT $49m. I usually expect these 2 measures to align somewhat, and with SKT they should do at a high level as depreciation $83m (in NPAT but not in cash) is pretty close to capex $88m (cash but not in NPAT).

If they are only earning $23m FCF on a $388m valuation its not a screaming buy, but the NPAT number of $49m is awesome. So which is the right number? Seems important. as there is a $26m gap.

After half and hour of investigation of the annual report, my conclusion is that:
- Even though depreciation expense was $83m this is light compared to actual money out the door for capex ($88m) and lease cost principal payments ($26.7m). The lease costs happen every year, so recurring and should be factored in.
- depreciation expense will increase in future years and decrease NPAT, as the new assets take the whole asset base higher.

So on this basis, the free cashflow measure is more representative and we are looking at a P/E of 16 on a no growth company. Expensive

Looking ahead
- capex will decrease in future years according to the company by 20-30% or so, which is $18- $27m odd. If we believe this, then 2025 will be more like $50m NPAT and $50m FCF. So a P/E of 7.5, cheap as bro and a buy.

Overall I like where this is going, trust management to get capex under control and back down to 7-9% of revenue, to control costs (made a good showing of this in 24), and keep customers. Im happy and believe they can increase dividends to 30c. Im holding and relaxed.

The large expense of the sky box/sky pod is a completely insane strategy when they have already proven they can serve their product via streaming apps. Basically burning money for no reason.