Analyst sees takeover target as Sky shares sink
Sky Television shares appear to be struggling to find a new floor, but analysts are edivided on whether the once-dominant paytelevision provider has been oversold by investors.
Sky has lost two-thirds of its sharemarket value since it announced its since-scuppered plan to merge with Vodafone
New Zealand in 2016.
A 25 per cent plunge during the past month saw its shares trade at an all-time low of $1.43 yesterday.
Over the past four years Sky’s share price has fallen 75 per cent, knocking more than $1.5 billion off its sharemarket value, which now stands at $560 million.
Sky is now sitting near the bottom of the NZX 50, though it is understood it would need to fall several more places to 55th place to drop out of the index.
The latest decline comes as new Sky chief executive Martin Stewart – a Briton who had been based in Dubai – heads overseas to meet foreign investors and drum up support for the business.
Morningstar analyst Brian Han said he believed Sky had been oversold and could be a takeover target at its current price.
‘‘Even if Sky’s dividend dropped to 11 cents next year, that would represent a yield of more than 7 per cent backed by a solid balance sheet,’’ he noted.
Morningstar estimates Sky shares should be worth $2.50 but Han said uncertainty about Stewart’s plans for the firm might be weighing on investors.
Sky halved its starting price to $24.91 a month by splitting Sky Basic into two packages last year, and Han said that tactic had been ‘‘so far, so good’’, with a relatively low number of customers downgrading.
A Sky media release announcing Stewart’s appointment in November talked up the change he was expected to bring, repeatedly describing him as a ‘‘transformational’’ leader.
Forsyth Barr analyst Matthew Henry was more bearish, noting Sky’s profit had fallen sharply once again in its interim results last month. ‘‘That is driven by the continued reduction in subscriber numbers.’’
Netflix now had more subscribers in New Zealand than Sky, he said. ‘‘The market is obviously factoring in the continuation of declining earnings. That is what our expectation is, so we wouldn’t say the share price is oversold at this point.’’