Hot Stock to watch: Shaw Communications Inc Class B (NYSE: SJR)

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Shaw Communications Inc Class B (NYSE: SJR) stock rose over 5.6% post decent third quarter of 2020 performance. The firm’s service revenue rose 17% yoy to $206 million, on the back of solid wireless ABPU and ARPU growth of 5.7% and 2.6%, respectively. The group’s overall revenue fell $10 million to $1.3 billion against prior corresponding period hurt by wireless equipment, but rose 1.4% yoy excluding wireless equipment revenue.

The Consolidated adjusted EBITDA rose over 15% yoy to $609 million, which includes $38 million related to IFRS 16. Wireless adjusted EBITDA reached $101 million which has over $18 million related to IFRS 16. Wireless adjusted EBITDA showed solid rise without accounting impact, surging 57% yoy, indicating significant operating leverage in the business. However, the Wireline segment, consumer revenue lost 1.3% yoy to $923 million. Wireline subscriber net losses rose during the quarter hurt by lower sales activity and promotions, but churn improved across all product categories. The firm closed 90% of corporate stores leading to a reduced wireless sales activity and lower postpaid churn to a record 0.96%. While the majority of wireless retail network is now open for business, customer activity and store traffic has not yet returned to pre COVID levels. But, their self-install performance continued to exceed the expectations reaching 72% in the quarter. The firm also enhanced their broadband infrastructure and services and launched an even faster Internet speed by launching new Fiber+ Gig Internet plan. The firm also laid off 10% of their workforce temporarily due to COVID-19.

The firm rose its bad debt provision by $5 million to equip itself in the current uncertain business environment. The firm generated free cash flow of over $220 million and $595 million on a year-to-date basis, which is 20% rise against prior corresponding period. They issued $500 million of 10-year senior notes at an attractive rate of 2.9% during April to boost their liquidity position. On the bright side, Management assured “don’t see anything scary” (as of July 10th, 2020) boosting investing sentiment as well. However, they withdrew their formal guidance of 4% to 5% EBITDA growth last quarter. The consensus is right around 2and expects to be back by October.

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