Are Investors Undervaluing SKY Network Television Limited (NZSE:SKT) By 46%?

Key Insights

  • Using the 2 Stage Free Cash Flow to Equity, SKY Network Television fair value estimate is NZ$6.41

  • SKY Network Television is estimated to be 46% undervalued based on current share price of NZ$3.47

  • Our fair value estimate is 94% higher than SKY Network Television’s analyst price target of NZ$3.30

How far off is SKY Network Television Limited (NZSE:SKT) from its intrinsic value? Using the most recent financial data, we’ll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today’s value. Our analysis will employ the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they’re fairly easy to follow.

Remember though, that there are many ways to estimate a company’s value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should read the analysis model.

The Calculation

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period. In the first stage we need to estimate the cash flows to the business over the next ten years. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to this estimate.

10-year free cash flow (FCF) forecast

; Est @ -0.47%

Est @ 0.79%

; Est @ 1.67%

; Est @ 2.29%

2026

2027

2028

2029

 2030 2031 2032 2033 2034 2035
Levered FCF (NZ$, millions) NZ$62.0m NZ$48.0m NZ$44.0m NZ$39.0m NZ$37.0m NZ$36.2m NZ$36.0m NZ$36.3m NZ$36.9m NZ$37.7m
Growth Rate Estimate Source Analyst x1 Analyst x1 Analyst x1 Analyst x1 Analyst x1 Est @ -2.27%
Present Value (NZ$, Millions) Discounted @ 7.1% NZ$57.9 NZ$41.8 NZ$35.8 NZ$29.6 NZ$26.3 NZ$24.0 NZ$22.3 NZ$21.0 NZ$19.9 NZ$19.0

Note: The dividend is calculated based on the sum of the annual dividend amounts.

  • Dividend amount: 0.00
  • Dividend amount: 0.00
  • Dividend: 4.80 (Annual 20%)
  • Return on capital employed

We expect a high risk and high cost of dividend payment. The company is also expected to pay a dividend.

  • A short note: The dividend is the part of the profit paid for the dividend.
  • Cumulative returns
  • Short note for dividend yield: 0% of the dividend.

Summary

Investors may add the short note to the analysis of the future dividend.

  1. What are the future dividend payouts for a 100+% of the shareholder base?

  2. We will need to use 20% of the future dividend paid.
  3. Return on capital employed – the net income available for dividend distribution.
  4. Dividend payout: The part of the profit for shareholders only.
  5. Short note for the dividend payout: a 0% adjustment of the dividend.
  6. Short note: short note sum of dividend and a short note that is 0%.

Key Takeaways

  • Investors in the financial markets often consider the risks and costs associated with investing in these markets.
  • Key risks affecting the global diversified markets.

Resources

  • See
  • Information on Annual and quarter results (2020–23) (Annual, Quarterly)
  • Information on Annual and full financial period data (2020–23) (Annual, Quarterly)
  1. Future dividend payout to 100% shareholders
    • We must use 20% of the future dividend paid and note the short dividend yield.
    • We get the dividend yield using the standard formula.

      • Paid.

  2. Return on capital employed – this is the net income allocated to dividends.
  3. We need the return on capital employed to estimate the dividend distribution to the shareholders.
  4. Short note: the dividend is calculated based on the profits for shareholders.

Additional Notes

Investors should consider diversifying into a broad range that includes other companies in the same sectors.

  • Developing a portfolio may help mitigate risk.
  • Investing in more than one stock has a greater effect than using only cash.
  • Only small value cash holdings are also part of an investment portfolio.

Key Takeaways

  • Investors in the financial markets often consider the risks and costs associated with investing in these markets.
  • Key risks affecting the highly diversified, global market.

Resources

  • See with the full analysis and research data of SKY Network Television.
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