Sky TV deserves premium against global peers

Monday 9th November 2009

Sky Television's "unassailable" position as New Zealand's only pay TV operator means it should trade at a premium to global peers, say analysts for Morningstar Equity Research in a post-annual meeting update report.

The company's continued success in the under-penetrated New Zealand market, coupled with a strong New Zealand dollar assisting during a period of major capital investment in the next phase of the MySky platform mean there is "upside risk" of Sky bettering consensus forecasts of EBITDA and NPAT of $285 million and $99 million respectively. The upper end of forecasts puts NPAT at $105 million for the full year.

"We anticipate capital expenditure this year to be around $120 million. Capital expenditure and programming cost will benefit from a high New Zealand dollar," Morningstar says.

While Sky's free-to-air channel Prime was suffering a weak advertising environment, its addition to the Freeview offering had improved audiences, and could expect to improve its position as the economy recovers.

Sky is targeting 80,000 new MySky subscribers this year, and 16% of the existing subscriber base is now on MySky, Morningstar says. Sky also reported a 5% increase in Average Revenue per Subscriber (ARPU) at $66.51 in the September quarter. Customers leaving Sky remain at very low rates, while the company is continuing to achieve "continual price increases" because of its "immense pricing power" in the New Zealand market.

Sky TV shares were trading at $4.89 today.

Businesswire.co.nz

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