2022.01.22 20:18 yothuyindi Random Stonk of the Week - Sky Network Television (SKT)
| Each week I'll be picking a random ASX stock that I've (personally, yes I'm aware it may have been covered at some point in history) rarely seen discussed online - and that I do NOT hold - that you voted for, for us to dive into for some "DD".|
This is for us to have a look at what it does, comb over their financials, and in the end discuss whether or not we'd buy into it. Not all of these stocks may be sexy or appealing; the whole point is to shine a light on what companies are doing out there on the ASX which never get much coverage - for good or bad.
The main purpose being to add some more variety in coverage to the standard blue chips or meme stocks we see pumped day in and day out, and hopefully discover some hidden gems or innovative companies on the Aussie market.
Here's this week's Random Stock of the Week.
Company name: Sky Network Television Ltd
A knife that would make Nevelo jealous
Headquarters: Auckland, NZ
Market cap: $396m
Current share price: $2.27
P/E ratio: ~9
1-year Performance: +56.5%
What they do, smoothbrain version: spam Kiwis with junk reality TV and dated show re-runs, along with like, heaps of rugby, bru
What they say they do, wanky version: "We’re all about bringing you the very best sport and entertainment. Whether you’re ready to sit up and cheer every All Blacks and Silver Ferns match, binge on the entire series of Game of Thrones, get to grips with what’s happening to our planet, or laugh and cry over classic movies, reality TV or local and global nail-biting drama, it’s right here." 🍆👋
What they do, actual version: Sky Network Television are a New Zealand-based satellite & digital TV provider that broadcast a wide range of licensed and original produced shows and live events.
Oh and, one important thing to note before we get into it: despite their name, no, they're not affiliated with "that" more controversial news outlet of the same name that operates elsewhere in the world.
Headquartered in Auckland, the company currently services a base of nearly 1 million customers; pretty impressive considering the total population of NZ is only just over ~5 million all up.
As a dual-listed company on both the ASX & NZX, the company does not get much play or media attention here in Australia. However by market cap, it ranks within the NZ50 index and thus making it a regular part of ETFs which track this index as a whole.
Member ugly satellite dishes on houses in order to watch shows? I member...
They have been around for quite a while. Founded back in 1987, Sky have been a satellite-based "Pay TV" broadcaster for the majority of their existence, beaming a wide range of shows - chiefly sport - through the sky (the name makes sense, see?) and into the homes of Kiwis across the country.
In many ways, Pay TV businesses were the model for the modern "SaaS" (Software As A Service) type companies to exist; something that's come around full circle with Sky today in the present day.
SKT listed on the ASX back in 2005, and had around a decade worth of up-and-down share price performance during its earlier years on the market.
It hit its peak in August of 2014, after which it embarked on a drastic down-trend for over half a decade: a period marred with failed merger attempts, declining subscriber numbers, and a dated technology and pricy infrastructure model that left shareholders' wallets bleeding.
It didn't help that all of this coupled with the emergence of digital-first streaming platforms such as Netflix and its clones, which popped up with more easily scalable business models, flashy marketing, and perhaps most importantly: an impressive catalogue of content.
Sky had become a bloated, asset-heavy business at this point, in danger of becoming a stubborn dinosaur - and eventually going extinct.
The SKT chart starts looking a lot better if you zoom in a little.
However, instead of remaining set in its boomer-ish ways and refusing to adapt, at the end of 2019 Sky began the first steps to what is looking like a massive turnaround; one that's saved their balance sheet, slashed unnecessary assets, and embraced a new digital-centric model that looks to have positioned it in a much better place moving forward.
Can they complete this reversal of fortune completely over the next few years? Let's take a look...
What looks good:
Add it all up, and this is a traditional company “going digital” in a big way, in all facets of the business. How it was allowed to continue for so long in its previous format with so much fluff & wastage is a bit boggling, and shareholders must have been pulling their hair out for several years because of it.
However, they now seem determined moving forward to keep trimming the fat and keeping things lean & mean.
Even in addition to the streamlined infrastructure mentioned above, simple things such as reduced marketing spend / reliance on external agencies also resulted in cost reductions.
Meanwhile, Sky's digital integration also included the acquisition of a Sports Analytics company, which provides data insights to be used to maximise user growth & marketing opportunities.
Media companies in general have been some of the bigger ‘winners’ of the onset of the Covid-19 pandemic.They also have implemented this idea of integrating data & engagement analytics throughout, which also allowed the company to cull certain programs the numbers proved people simply weren’t engaging with. This led to additional savings on licensing rights for these less-viewed programs, via either re-negotiating their contracts, or simply cutting them entirely.
This analytics-driven approach is a necessary switch that most ASX media companies - even the big market cap dinosaurs - have gradually started to realise.
Media companies in general have been some of the bigger ‘winners’ of the onset of the Covid-19 pandemic; particularly those who were digitally savvy from the get-go. More people staying home meant more eyes online; the pandemic gave news outlets endless stories to pump out as people continued to be fearful; fear equalled clicks; and clicks equalled more revenue.
Sports also proved a welcome distraction for many, and Sky's heavy focus in this area certainly helped its cause despite some of the choppy stop-starts various sporting codes have experienced during the pandemic years.
Sky's new, slicker set top box will roll out later in 2022.
A focus on continued user experience and app improvements will also be key to keeping customers around/seeing added value.
They're aiming to roll out the new, sleeker version of their Sky Box set-top box later in 2022, which will have a slew of additional features such as built-in Android app & Netflix interfaces, 4K resolution streaming, and voice control (because why the hell not?).
Overall rating (strong buy/buy/hold/avoid): While the general sentiment from all the above seems overwhelmingy positive and would probably indicate a buy, I'd probably go with a "hold" until we see proof that the pandemic-induced boom wasn't just an anomaly.
That might not sound like a ringing endorsement, but given it would have rated as a "do not touch with a 10,000 foot pole" just a couple of years prior, it's certainly a massive step up.
As things gradually start to open up - and even with new Covid variants raging, people say 'screw it' and want to get out of their homes - subscription services like this may be some of the first discretionary expenses to be cut.
Sky will also have to pony up whatever additional licensing fees are required to retain all their key content after some of their short-term 'bargain' deals come up for renewal, which will eat into margins somewhat.
Still, the fact that they even do look appealing as an investment at all nowadays is a testament to the solid work of the management team in executing a viable plan in a relatively small amount of time. The end result is a much slicker and streamlined company with a pretty captive market and a solid level of market dominance in NZ.
Given its current financials, and compared to the rest of its ASX media peers, the share price does look fairly 'cheap' at time of writing if you believe that management can keep the good times rolling. Typical SaaS-esque companies that are more tech-focus typically trade at far higher P/E multiples than ~9, and with the pivot to digital that's essentially what Sky is becoming.
A lot of how the stock performs in the immediate future will also likely depend on what Sky decide to do with their excess capital policy; we've seen companies that come into large chunks of cash all of a sudden make some silly decisions in terms of acquisition.
If management do well in terms of an adequate capital return/dividend announcement/show continued streaming growth, this stock could re-rate closer to what it's worth based on its assets and revenue. If they rush into buying something stupid, they could kill the feelgood story before it's even properly been started.
Don't be those guys and ruin a good narrative, SKT.
Company website: https://www.sky.co.nz/
MarketIndex page: https://www.marketindex.com.au/asx/skt
Link to web version: https://ausinvestors.com/skt-stock-of-the-week/
Vote for next week's Random Stonk of the Week: https://ausinvestors.com/poll
Links to previous Stonks of the Week: https://ausinvestors.com/category/random-stock-of-the-week/
Feel free to add your own opinions on SKT in the comments below.
Would you buy this stock? Why or why not? Feel free to vote in the poll.
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Hints : Its a boy band
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You can pick two of my dupes [ You can only take one of each ]
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submitted by 20exit to ethdev [link] [comments]
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