Bank: Viaplay de-risked for Q4
January 19, 2023
In December 2022, pay-TV operator Viaplay and rival Telia entered into a partnership in Sweden. Further news emerged on January 18th with Viaplay and Bell Media’s Crave streaming service agreeing a distribution agreement for Viaplay Select in Canada.
Ahead of the Canadian deal, a report from investment bank Berenberg, said the Telia news “was a surprise”. The bank maintains its ‘Buy’ guidance for clients.
Berenberg says the surprise followed Viaplay management on its Q3 results call suggesting that any near-term deal was “unlikely”. The bank, however, had noted at its European Conference in December that the company said it had restarted talks with Telia.
“With a significant portion of 2022’s outlook downgrade driven by the end of the companies’ original partnership and the full impact due to have been felt in 2023, a new, ‘expanded’ deal is a clear incremental positive, and we include it in our numbers accordingly,” states Berenberg.
The report adds: “A key downgrade in Viaplay’s original 2022 outlook was the 200,000 reduction in Nordic subscribers, from 4.8 million to 4.6 million. While this partly reflected slower uptake of Norwegian subscriptions, another key element was the loss of 200,000 customers subscribing via Telia. We previously estimated that only 125,000 of this 200,000 would return to Viaplay over Q4. We now understand that Telia customers who were kicked off Viaplay in October and did not terminate their Telia TV package have recovered access to their original Viaplay subscription (via Telia) on completion of the new deal in December. While this does not mean Viaplay has recovered all previously ‘lost subscribers’, this does make the level of net adds required in Q4 to reach its guidance more manageable; we thus nudge our estimates up, albeit marginally short of guidance. As we had already assumed all Telia subscribers would be recovered in 2023, we make no further changes to our 2023 estimates.”
The report summarises the impact of these changes, and results in Berenberg increases its share price target modestly, from SEK315 to SEK322 (based on a 50/50 blend of DCF and SOTP).
“Even on our lower-than-guidance estimates for 2025, Viaplay trades on a c6x EV/EBIT multiple, well below secularly challenged European broadcaster peers. We believe that this reflects too much conservatism about Viaplay’s ability to grow; we believe it can achieve growth through B2B partners (at the expense of ARPU growth), ultimately allowing Viaplay to generate operating leverage over its largely fixed cost base,” the bank concludes.