Advanced Television

Bank: “Viaplay down but not out”

November 7, 2022

Investment bank Berenberg says that Viaplay, the fast-expanding Nordic – and wider European – pay-TV and streaming operator is suffering from its Q3 financials. Indeed, says the bank, there is still “significant uncertainty” over the broadcaster’s Q4 performance.

Nevertheless, Berenberg delivers ‘BUY’ advice to clients on Viaplay Group’s shares despite “the failure of strong direct-to-consumer (D2C) growth after Viaplay acquired the English Premier League (EPL) rights in Norway [being] the main culprit behind the miss on Nordic sales, alongside an unexpected organic decline in advertising revenue. These factors, combined with the end of the agreement with Telia Sweden (leading to a loss of 200,000 subscribers and an unquantified amount of carriage fees, apparently in the “hundreds of millions” of kronor), create significant uncertainty as to whether Viaplay can meet its FY 2022 guidance.”

The bank gives a Price Target of SEK 315 (€29.13) – last week Viaplay was trading at about SEK 188.45. The low trading price last week was a result of a 30 per cent fall over two days and a share price collapse of 63 per cent over the past 12 months.

“Viaplay’s Q3 results were a relatively large hiccup in what had been up until then a well-executed structural growth story. As was the case in the last couple of quarters, the international business continued to perform well with the Netherlands and Poland both reaching subscriber bases of above 1m and total international subscribers’ 10 per cent above expectations,” says the bank.

It adds: “We believe this milestone was broadly expected for the Netherlands, based on previous commentary, but there had been some concerns regarding Poland’s slower growth and here we believe the business-to-business (B2B) distribution agreement with Canal + Polska was a key driver in improving recent performance. Viaplay increased its international subscriber outlook target by 0.2 million to 2.7 million, but this simply reflected the acquisition of its UK business (Premier Sports, which currently has 222k subscribers) as opposed to an improvement in the underlying performance of its other international markets.”

“So far,” says the bank, “Viaplay’s international rollout has been an area of consistent upgrades to both subscriber numbers and associated losses on the back of much greater-than-anticipated demand. We believe a large part of this outperformance reflects an initial underestimation of consumers’ willingness to switch from previous pay-TV rightsholder platforms to using SVoD platforms to continue watching live sport, but International has clearly benefited from strong operational execution as well.”

The bank’s bottom line says: “Strong execution required in 2023 to regain confidence in 2025 targets. If the Q3 miss and cut in short-term guidance had been a temporary hiccup, the shares – while they would not have reacted favourably – would probably not have fallen nearly 30 per cent over two days. The driver of this sharp derating was a downward revision in Viaplay’s longterm guidance, particularly for the Nordics.”

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