SKT Sky Network Television Limited.

[JohnnyTheHorse]

I'm concerned for our good friend Ogg .. I fear that he may have sold up too early
& may be now missing out on the best of the spoils

More than likely. There's nothing more important than your mental capital however.

[Rawz]

A profit is a profit. A lot of shoulda woulda coulda when picking entries and exits. Well done to Ogg. Hopefully he picks another horse to cheer about

[mistaTea]

A profit is a profit. A lot of shoulda woulda coulda when picking entries and exits. Well done to Ogg. Hopefully he picks another horse to cheer about

Agreed.

Well done Ogg - I think you have made a sensible trade her, given your objectives and the toll owning a piece of Sky was having on you.

You have made the right decision I think - regardless of what the SP does from here on out.

[Stranger_Danger]

Isn't life a funny thing. I remember sparring with Ogg and others many, many pages back in this thread about what a dog SKT was and the difficulty in trying to sell things that are now easier to get for free.

I continue to watch whatever I want, from anywhere, without paying a cent and will never again be a Sky subscriber.

I bought a meaningful amount of SKT on Tuesday and a smaller amount yesterday (including some from Ogg, by the sounds of it) so for the near future, rather than me coming into this thread to laugh at Ogg...they can come into this thread to laugh at me!

I remain very negative on SKT on a 5-10 year view. The local cable aggregator model is toast, and I suspect the local streamer model isn't going to be much better.

However, the balance sheet has been completely repaired - by other people - and without capital management they will have a good amount of the market cap in cash by the end of next year.

One "advantage" of how badly run and sleepy this company has been is there is plenty of fat to cut if they look for it, and the early signs suggest that they will.

I suspect that the next 6-12 months are not going to be pretty for long duration stocks and bonds. Anything that you pay an insane price for and are asked to close your eyes for 10 years and assume sugar plum fairies at the end is likely to struggle.

In some ways, SKT is the ultimate short duration stock. If I close my eyes for 10 years, I see oblivion at the end, so at least there is no confusion.

In the shorter term, while all the consultants hanging around doesn't say great things about management, it does increase the odds some sort of capital management is going to occur. SKT is likely to produce real cash for a while, in an environment where a lot of companies won't, and in an environment where this trait will suddenly be valued by the market more than it has been in recent times. This can be purchased at a relatively low price which - correctly - discounts the awful longer term outlook the company has.

Unless markets totally implode (which can never be ruled out) Foxtel will likely float on higher multiples than SKT with a prospectus that includes a plan to add a million subscribers over several years. They could tick that box pretty easily with a takeover of SKT. My thesis does not depend on a takeover, but one is very possible.

Summary : If you see me in here in two years time talking about bottom drawers, and about how pay TV is making a comeback, I've lost my mind and you can book me into the funny farm. I do see a shorter period ahead, after massive pain dealt out to shareholders, where the stock and to a lesser extent the company is likely to do the things (by accident and by consultant) that just happen to be of above average attractiveness to the market, given the dynamics likely to be in place at that time.

[snigmac]

With a forecasted dividend of 10c per share, even a stalling of price gains after $3 would be fine.

[Vitamin_A]

Forgetting about the cash, taking an ultra conservative EV/EBITDA multiple and the low end of the forecast EBITDA range you get $2.60 per share. You then add in the cash and you get a 'conservative' number heading towards $4.00 per share. Then consider the ongoing cash generating and dividend policy and you have a stock that even after this run is super dooper cheap.

[mistaTea]

Isn't life a funny thing. I remember sparring with Ogg and others many, many pages back in this thread about what a dog SKT was and the difficulty in trying to sell things that are now easier to get for free.

I continue to watch whatever I want, from anywhere, without paying a cent and will never again be a Sky subscriber.

I bought a meaningful amount of SKT on Tuesday and a smaller amount yesterday (including some from Ogg, by the sounds of it) so for the near future, rather than me coming into this thread to laugh at Ogg...they can come into this thread to laugh at me!

I remain very negative on SKT on a 5-10 year view. The local cable aggregator model is toast, and I suspect the local streamer model isn't going to be much better.

However, the balance sheet has been completely repaired - by other people - and without capital management they will have a good amount of the market cap in cash by the end of next year.

One "advantage" of how badly run and sleepy this company has been is there is plenty of fat to cut if they look for it, and the early signs suggest that they will.

I suspect that the next 6-12 months are not going to be pretty for long duration stocks and bonds. Anything that you pay an insane price for and are asked to close your eyes for 10 years and assume sugar plum fairies at the end is likely to struggle.

In some ways, SKT is the ultimate short duration stock. If I close my eyes for 10 years, I see oblivion at the end, so at least there is no confusion.

In the shorter term, while all the consultants hanging around doesn't say great things about management, it does increase the odds some sort of capital management is going to occur. SKT is likely to produce real cash for a while, in an environment where a lot of companies won't, and in an environment where this trait will suddenly be valued by the market more than it has been in recent times. This can be purchased at a relatively low price which - correctly - discounts the awful longer term outlook the company has.

Unless markets totally implode (which can never be ruled out) Foxtel will likely float on higher multiples than SKT with a prospectus that includes a plan to add a million subscribers over several years. They could tick that box pretty easily with a takeover of SKT. My thesis does not depend on a takeover, but one is very possible.

Summary : If you see me in here in two years time talking about bottom drawers, and about how pay TV is making a comeback, I've lost my mind and you can book me into the funny farm. I do see a shorter period ahead, after massive pain dealt out to shareholders, where the stock and to a lesser extent the company is likely to do the things (by accident and by consultant) that just happen to be of above average attractiveness to the market, given the dynamics likely to be in place at that time.

A reasoned post - and many will share your view I am sure.

I should point out though that everyone has been writing Sky off since the 1990's. It is always 'different this time' and Sky will definitely be bust within a few years because of x, y and z...

Over the last couple of years the market has shared this view and Sky has been priced as though it will be bankrupt within 5 years. That is despite continuing to produce profit and show the ability to secure important content rights.

Back in the 1990's everyone thought that the 'new fangled' satellite techology was going to kill Sky TV. Don't forget, they started off with a three channel UHF service.

But what happened? Well, Sky pivoted and utilised this new technology for themselves - and very successfully too. I remember some of the old letters from John Fellet where he mused that it often struck him as odd at the time that everyone thought that satellite technology would be the end of Sky...but nobody seemed to consider that Sky would just use the new technology. He took the business over time from losing $1M a week to making a profit of $1M a week.

Is it really different this time? I don't think so - Sky will leverage streaming technology, but they don't have to turn the satellites off over night. They have capacity to evolve to streaming...and the new STB will be a key piece of technology that bridges that gap. Will we get to the point where Sky don't use satellites at all and just stream everything? Possibly, but I think that is a big assumption.

And, ultimately, I reject the notion that the 'cable aggregator' model is totally dead. Content aggregation is still the best way to get maximum high quality content to consumers at the best price (we can argue what constitutes a good price, but aggregation has always allowed consumers to get a bundle of content for much cheaper than if they were to try subscribe to each service individually). As Sky offer new services like broadband (and eventually mobile) then the content aggregation bundles become even more consumer friendly in that they get greater discounts with the more services they add.

So though I do think you make some good points, I have a very different view on Sky's long term prospects. I would classify Sky as a 'forever' company...and Sky will continue to evolve and pivot as things change in the industry.

For example, I believe that it is inevitable that Sky become a fully fledged telco before long. Irrespective of whether they end up merging with Foxtel or not.

[Stranger_Danger]

mistaTea,

You may end up correct on every potential positive, but to me it doesn't really matter. If the business surprises to the upside, especially in the longer term, good for them.

To me, the key point is that I am able to make a strong value case for the stock using NEGATIVE assumptions about the long term business. This is no guarantee of anything, of course, but it is the sort of opportunity I look for.

The less I need to believe management, or make positive assumptions, or cross my fingers, the better things are for me.

[mistaTea]

mistaTea,

You may end up correct on every potential positive, but to me it doesn't really matter. If the business surprises to the upside, especially in the longer term, good for them.

To me, the key point is that I am able to make a strong value case for the stock using NEGATIVE assumptions about the long term business. This is no guarantee of anything, of course, but it is the sort of opportunity I look for.

The less I need to believe management, or make positive assumptions, or cross my fingers, the better things are for me.

I agree with you 100%...and we, as investors, always need to be able to write the NEGATIVE case as well as the POSITIVE case. In fact, writing the negative case is usually more important...and one has to do that with intellectual integrity.

It does not stop there though...it is very easy to write down a list of both negative and posotive assumptions.

Where the skill comes in is establishing in your own mind, based on whatever framework you use...how likely each outcome is.

I think that the worst case scenario where Sky lose all of their key rights to Spark and others and/or the majority of consumers pirate their content to cut Sky out of the equation is low. I could be wrong about that in time.

I think that we will find that Sky do let go of more rights over time if Spark Sport does not fold, but the business will hang on to key rights (sometimes on a co-exclusive basis) and remain FCF positive for the foreseeable future. This to be seems much more likely, but I could be wrong.

I believe Sky will make a move to get more scale (becoming a telco, merging with someone like Foxtel or both). Though I could be wrong about that.

My view though has always been that, on the balance of probabilities (so far as I am able to assess them) Sky is much more likely to succeed over time than fail.

To me, it is not wise from an investment perspective to buy a portion of a business that you feel has incredibly grim long term prospects but are essentially banking on some positive price action in the short term. You may do well, but if the market turns against you in the short term and your Business Case for owning Sky TV is not rock solid you will more likely get caught not wearing any pants when the tide goes out.

[Stranger_Danger]

To me, it is not wise from an investment perspective to buy a portion of a business that you feel has incredibly grim long term prospects but are essentially banking on some positive price action in the short term. You may do well, but if the market turns against you in the short term your your Business Case for owning Sky TV is not rock solid you will more likely get caught with not wearing any pants when the tide goes out.

I don't want my business case to be rock solid, I want it to be flexible, with eyes wide open, and willing to react rationally to changes.

If the tide goes out and I'm not wearing pants, my goal will be to get the hell off the beach before too many people see me naked. The more "rock solid" I am, the less likely this is.