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Bank upgrades Viaplay

January 4, 2024

By Chris Forrester

Shareholders – and management – might have breathed a sigh of relief with the news from investment bank Jefferies that it was upgrading its view of Viaplay Group’s prospects from ‘Underperform’ to ‘HOLD’.

The news comes after a torrid time for Sweden’s Viaplay operation, which focuses on streaming in a number of international markets. It had acquired an expensive suite of sports rights and sas forced to give some of them up.

In July 2023 it laid off about 25 per cent of its staff and said it would refocus on its core Scandinavian markets.

Analysts at Jefferies admit that as recently as June 2023 (when it downgraded Viaplay) it was worried about the risk of Viaplay’s “stretched balance sheet” and anticipating the broadcaster breaching its banking covenants.

Fresh capitalisation (of SEK 4 billion – about £0.36bn) plus a half-billion debt-for-equity swap and SEK 1.5 billion debt write-down followed on December 1 2023 and has encouraged Jefferies.

“Our near-term forecasts are largely unchanged, though we lift our medium / long term EBIT margin assumptions towards the long-term guidance of ‘double-digit’, fairly reflecting the more sustainable commercial footing of the reduced Viaplay (Nordics + Netherlands + Viaplay Select),” says Jefferies.

The bank admits that Viaplay could still struggle to make its way in what remains a crowded market, and continued price inflation in winning and holding onto sports rights can be a difficulty.

However (and in the bank’s ‘Upside Scenario’) Jefferies says that those sports costs could stay manageable, and Viaplay does manage to monetise users despite the crowded market. Get these elements right and the bank suggests there could be a significant improvement in Viaplay’s share price (SEK 10, up 93 per cent).

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