We reaffirm our Outperform recommendation on
Shaw Communications Inc.
), primarily based on the company's improving EBITDA margin and
free cash flow due to the discontinuation of promotional
activities. The company's fourth quarter results topped the
Zacks Consensus Estimates. The loss of basic video and digital TV
subscribers were more than offset by huge gain of high-speed
Internet and cable telephony subscribers. Management has provided
a rosy financial outlook for the ensuing fiscal 2013.
In the fourth quarter of fiscal 2012, Shaw Communications
performed impressively with respect to net customer additions on
several fronts. DTH customer base was 910,023, representing a
quarterly net addition of 1,155 customers. Digital phone lines
were 1,363,744, reflecting a year-over-year net addition of
24,185. High-speed Internet customer base stood at 1,912,230,
reflecting quarterly net addition of 6,062 customers.
Furthermore, Digital TV penetration rate is now 86.4% of basic
Quarterly EBITDA increased 4% year over year. However,
whenever the company tried to reduce its promotional activities
it lost a large amount of pricier subscribers. On the other hand,
higher promotional activities are impairing the company's bottom
line and free cash flow. It seems management has finally found
out an appropriate trade-off between these two situations.
Management has forecasted that the company's revenue and EBITDA
will further improve in fiscal 2013 whereas free cash flow will
remain same with that of the previous year.
Shaw Communications has launched - "Shaw Go" - an innovative
TV Everywhere service, which is available only on
) developed iPad 2 and iPhone 5. Initially, this service will
only offer the company's Movie Central applications. However, in
the near future, the company will also offer streaming live TV,
on-demand content and several family-focused programs through
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