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Thursday, July 14, 2011

bskyb shares prospect and analysts predictions

bskyb shares prospect and analysts predictions : Since the phone hacking scandal broke, and the likelihood of a successful offer lessened by the day, BSkyB shares have dropped from 850p, wiping around nearly £3bn off the company's market value..

Already weak on the day, they slumped around 4% to a low of 663.5p as the news broke, as hopes of a profitable offer of up to £10 a share disappeared.

But the shares have since recovered to 687.5p, down just 4.5p on the day, with some investors backing the company's prospects and cash generative ability - the qualities which attracted Rupert Murdoch to try and buy the whole of the business in the first place.

BSkyB Shares goes back to a more fundamental valuation and the question now is what are they going to do, are they going to invest their cash or will they return it to shareholders.

Alternatively, there is also the prospect that Murdoch could come back once all the fuss has died down. After all, under takeover panel rules News Corporation can theoretically bid again in six months, and it would have taken much longer than that for the existing bid to have cleared the various regulatory and political hurdles being thrown up in its way. Perhaps he will lick his wounds and return.

The News Corp statement makes it clear the company wants to be a long-term shareholder in BSkyB at the very least.

On the other hand, if the fit and proper person test is still applied and News Corp does not pass, there is a chance it will be forced to dispose of its existing 39% stake. That could well prove a drag on the BSkyB shares until the situation is resolved.

according to analysts at Royal Bank of Scotland
Investors in BSkyB (LON:BSY) need to switch their focus back to the fundamentals of the company now that the NewsCorp merger looks increasingly unlikely to succeed in the near term,

The group’s shares have shed over 150p, about 18 percent, from 845 to 693p in the past week. But in a note to clients RBS repeated a ‘buy’ recommendation, but cut its price target from 900 to 830p as it removed the anticipated NewsCorp synergies from the valuation.

RBS analysts Paul Goode and William Mairs reckon Sky

The analysts are forecasting 8 percent revenue growth in 2011/12, despite a one year freeze in subscription prices from September 2011.

They add that the rising penetration of high definition subscriptions, broadband and telephone services will continue to drive increasing average revenue per unit, albeit at a slower pace than last year.

Furthermore RBS reckon Sky’s customer base will continue to grow, with analysts expecting subscribers to hit the 10.5 million mark by June 2012.

Looking at the NewsCorp deal Goode and Mairs believe that NewsCorp chief executive Rupert Murdoch has bought more time in an attempt to ride out the bad press relating to the phone tapping scandal that’s rocked the group’s wholly-owned News International business.
However the analyst doesn’t think investors should have to wait that long for a cash return, instead he reckons Sky should pay a 130p dividend to shareholders.

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