Sky Network Television Limited

Trading Towards 52-week Lower Levels: SKY Network Television Limited (ASX: SKT) has an operation in commercial music, investments, broadcasting services, and entertainment quizzes in New Zealand. The company recently announced that its substantial holder Accident Compensation Corporation increases its interest in the company from earlier 5.162% to 6.180%. On the other hand, the company disclosed that Allan Gray Australia Pty Ltd and its related bodies corporate decreased its interest in the company from 7.110% to 6.092%. In another update, Sky CEO Martin Stewart reaffirmed the company’s accelerated focus on providing highly appealing and competitive streaming services.

H1FY19 (ended on December 31, 2018) Key Highlights: Total revenue for the half year was reported at NZD 403.03 Mn as compared to NZD 439.85 Mn in the previous corresponding period. In the balance sheet, the cash and cash equivalent at the end of the period was reported at NZD 6.96 Mn as compared to NZD 22.36 Mn in the previous corresponding period.


H1FY19 Income Statement (Source: Company Reports)

What to expect: In August, the company expected to launch its new sports App which will have a superb content line-up, new pricing, and great features.It is also expected to have a number of enhancements planned on Sky Go and Neon that will increase quality, choice and ways of enjoying those services.

Stock Recommendation: Sky Network is presently trading close to its 52 weeks low level of $1.100 with an annual dividend yield of 12.66%. Its gross margin, EBITDA margin and net margin for H1FY19 stood at 37.8%, 31.8% and 13.3%, which are lower than the 1H FY 2018 figures of 41.1%, 35.4% and 15.4%, respectively. Based on the mix scenario, we have a wait and watch stance onthe stock at the current market price of $1.110 (down 0.448% on July 5, 2019).
 

Ardent Leisure Group Limited

Decent top-line growth in 1HFY19: Ardent Leisure Group Limited (ASX: ALG) is Australia’s successful leisure and entertainment group. The company recently announced a change in its directors’ interest where Gary Weiss acquired 1,091,375 shares at $1.0219 per ordinary share. Revenue from continuing businesses (Main Event and Theme Parks) increased by 19% in 1HFY19 as compared to the previous corresponding period. Revenue from Main Event witnessed a growth of 23.4%, which was offset by the impact of the sale of Marinas (Aug-17) and Bowling & Entertainment (Apr-18), which contributed $75.1 million in the prior corresponding period.

Business unit statutory earnings before interest, tax, depreciation and amortization (EBITDA) continued to be impacted by costs relating to the Thunder River Rapids ride incident at Dreamworld and restructuring costs. Prior period’s statutory EBITDA includes a $22.8 million non-cash valuation loss on Dreamworld.  Borrowing costs reduced to $1.5 million due to large debt repayments and facility reductions following the sale of the Marinas and Bowling & Entertainment businesses in the prior period. Current period income tax benefit includes a $5.4 million tax benefit recorded in the Trust following the completion of the Group destapling and corporatisation in Dec 2018, offset by a $7.6 million tax expense relating to current period tax losses not recognised as a deferred tax asset. Prior period income tax benefit includes a $14.9 million one-off credit in connection with US Tax Reforms, which have lowered the US corporate income tax rate.


H1FY19 Key Financial Metrics (Source: Company Reports)

What to expect: TheGroup extended its existing credit facility to February 2020. This facility provides the Group with secure funding as it continues to implement strategic initiatives to drive improved performance at Main Event and focuses on returning Theme Parks to sustained profitability; and flexibility to evaluate and implement the most efficient capital structure for the business. The company has been assessing a range of the alternatives in order to fund future growth, with a view to achieving the optimal balance of strategic and operating flexibility, tenor and cost.

Stock Recommendation: Ardent Leisure’s share generated positive three months return of 1.35%. It is presently trading below the average of 52 weeks high and low levels of $1.325.Its gross margin for H1FY19 stood at 73.0%, which is better than 72.8% in H1FY18. Moreover, on the valuation front, its EV/Sales for TTM stands at 1.5x, which is lower than the industry median of 1.9x. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $1.130 (up 0.893% on July 5, 2019).  

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