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Shaw Communications (SJR) Raised to Buy: Should You Add?

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On Sep 19, Shaw Communications Inc. was upgraded by a notch to Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The upgrade came on the back of the company’s latest strategic business initiatives. Shaw Communications recently sold its data center operations, ViaWest, to Peak 10 Holding Corp. the company also completed the purchase of wireless spectrums from Quebecor Media Inc.

Shaw Communications completed the sale of ViaWest to privately held Peak 10 Holding Corporation, for a consideration of C$2.3 billion (around $1.675 billion). Shaw Communications expects net cash proceeds of C$900 million after paying for nearly US$580 million of ViaWest’s debt and US$380 million of credit facility borrowings associated with the original takeover.

Further, Shaw Communications has decided to spend the net proceeds from ViaWest sale to acquire highly valuable wireless spectrums. On Jul 24, 2017, Shaw Communications announced the closing of the acquisition of 700 MHz and 2500 MHz wireless spectrum licenses from Quebecor Media for $430 million. This includes 10 MHz of 700 MHz spectrum in British Columbia, Alberta and Southern Ontario, as well as 20 MHz of 2,500 MHz spectrum in Vancouver, Edmonton, Calgary and Toronto.

The company’s outlook upgradation by Moody’s Investor Services was a major positive. The rating agency reaffirmed the company’s Baa3 senior unsecured ratings. Moody’s stated that the primary reason for the upgrade is the recent business restructurings of Shaw Communications.

Additionally, in the third quarter of 2017, Shaw Communications witnessed massive growth of cable TV subscribers for the first time since 2010, marking an overall gain of 58,491 subscribers from Consumer and Wireless divisions. At the Consumer segment, the video cable customer base totaled 1,663,710, reflecting a net addition of 12,921 subscribers in the quarter under review. Video satellite customer count increased 6,531 to 776,825. With the addition of 20,892 customers in the quarter, the company's Internet base reached 1,838,964. However, Digital phone lines grossed 930,066, reflecting a sequential reduction of 1,827 lines. In the Wireless Segment, the postpaid customer base totaled 735,002 marking a net addition of 20,085 customers from the previous quarter. However, the prepaid section lost 111 customers from the prior-year quarter, taking the total to 371,157 customers. The company exited the quarter with 6,892,583 customers, including 1,106,159 Wireless subscribers.

The company has also placed itself as a pure-play Canadian telecom company with the divesture of Shaw Media to Corus Entertainment.Shaw Communications ventured into the Canadian wireless market with the acquisition of a 100% interest in Mid-Bowline Group Corp, the parent company of WIND Mobile Corp, for an enterprise value of approximately C$1.6 billion (around $1.16 billion).

Price Performance

Over the past three months, shares of Shaw Communications have inched up 0.35% as against the industry’s decline of 2.62%.

 

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