Macquarie Upgrades Dish Network (DISH) to Outperform; Verizon or AT&T could pay US$75/sh+
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Macquarie upgraded Dish Network (NASDAQ: DISH) from Neutral to Outperform with a price target of $62.00, saying "there’s a bright light at the end of the AWS-3 tunnel. August 16th marks the start of forward auction when all phases – beginning to end – pose as meaningful catalysts to take DISH shares higher."
Analyst Amy Yong highlighted:
#1 A new ~US$3bn convert provides ample liquidity to purchase spectrum in the AWS auction, and bulk up its already substantial ~80Mhz spectrum portfolio. The conversion premium of US$65.18 with hedges up to ~US$86 highlights the intrinsic value of the company and prevents share dilution. Dish aka ParkerB now has up to US$5bn to spend in the auction as well as to pursue other strategic assets including Ligado.
#2 Anything above the reserve price of US$1.25/Mhz-PoP would be meaningful to the stock. The auction is set to raise up to US$88.2bn, pegging spectrum at US$2.21/Mhz-PoP. Our US$62 target assumes a very conservative US$1/Mhz-PoP or US$35/sh; every US$0.25/Mhz-PoP increase in spectrum value equates to a ~US$10/sh increase to our valuation.
#3 Auction postponement or hiccups could make Dish one of few near-term sources of spectrum. The FCC’s US$88.2bn clearing cost could delay the auction past its expected 4Q close.
Upon conclusion of the auction and with the anti-collusion period over, we believe Dish has multiple paths to monetize its spectrum. Our assumption is that Dish would like to position itself as a connectivity company. Thus, separating its spectrum from its core pay TV business is less likely.
#4 Leasing spectrum to a third party and/or build-outs with a partner to meet FCC requirements. These scenarios could generate US$300m-US$800m in EBITDA which would re-rate multiples even higher while leaving some spectrum value at ~US$22/sh. Meanwhile, we assign ~5x to the DBS/Sling TV business, which takes this scenario to ~US$65/sh.
#5 A Dish-T-Mobile merger which could result in PF valuation of ~US$70/sh.
#6 Verizon or AT&T could pay US$75/sh+ for Dish. This assumes a conservative ~20% premium and minimal synergies. For AT&T, we see synergies of US$15-20bn from combining DirecTV with Dish
SI NOTE: DISH has been targeted by short sellers at Kerrisdale Capital
Shares of Dish Network closed at $51.29 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Hot Upgrades, Rumors, Short Sales, Upgrades
Related EntitiesS3, Definitive Agreement, Kerrisdale Capital
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