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In today’s daily we have covered stock research on SEVEN WEST MEDIA (BUY).
The S&P 500 was up by 22.78 points or 1.09% on Friday and closed at 2108.29 points. U.S. stocks bounced back sharply on Friday as investors snapped up beaten-down shares in the healthcare and technology sectors, and as data gave further signs of a pickup in the economy.Apple provided the biggest boost to the major indexes, jumping 3 percent to $128.95 in its biggest daily percentage gain since January. The stock lost 2.7 percent on Thursday.Greenbrier gained 8 percent to $62.33, while Trinity Industries rose 6.9 percent to $28.96.American Railcar was up 5.9 percent at $56.18.
The NASDAQ snapped a four-day losing streak while the S&P tech sector gained 1.5 percent,among the day's best-performing sectors. Biotech shares also rebounded, ending a five-day losing streak. The Nasdaq Biotech Index was up 2.9 percent for the day, but lost 5.5 percent for the week, it’s worst such decline since March 2014. Shares of Gilead rose 4.5 percent to $105.01, helping to lift both the NASDAQ and S&P 500, after its quarterly profit nearly doubled.LinkedIn, Twitter and Yelp all notched their biggest weekly percentage declines since their debuts. LinkedIn, which reported results late Thursday, dropped 18.6 percent to $205.21.
APPLE Daily Chart (Source - Thomson Reuters)
S&P ASX 200 was up by 24.4 points or 0.42% on Friday and closed at 5814.40 points. ANZ was up 0.5 per cent on the day but down 4.4 per cent for the week, Commonwealth Bank was up 0.1 per cent for the day but down 3.5 per cent for the week, National Australia Bank was up 0.1 per cent for the day but down 3.3 per cent for the week, and Westpac was up 0.7 per cent for the day but down 4.4 per cent for the week. In the aviation sector, Virgin Australia narrowed its bottom-line loss to $28 million for the third quarter after an end to the so-called capacity war withQantas in the domestic market led to higher returns on fares.
Fortescue rebounded strongly, soaring 9.2 per cent to $2.37 despite another drop in the iron ore price. BHP and Rio gained 1.7 per cent and 2 per cent respectively. The latest Bloomberg rates survey is out and it shows that an overwhelming majority of economists expects the Reserve Bank to cut rates on Tuesday. Origin Energy shares are up 2.35 per cent at $13.04 after the oil price gained and the oil and gas producer said March quarter production is up 14 per cent.
ORIGIN Daily Chart (Source - Thomson Reuters)
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Stock Of The Day - Seven West Media (BUY)
Seven West Media Ltd (ASX: SWM) was in the news on 29 April 2015 as it entered a trading halt when it announced that it would undertake a capital raising of $150 million. The fresh capital is required to compensate for soft free-to-air television and print media advertising revenues, reducing the company's debt load and allowing it to continue investing in order to retain its market leadership in the free-to-air TV business. It is easy to understand the resource constraints considering that the company competes fiercely with rivals Nine Entertainment Co Holdings Ltd (ASX: NEC) and Ten Network Holdings Limited (ASX: TEN) in the quest for viewership and advertising revenues. The company is also competing in the digital business with its online news service Yahoo7 and the launch of online streaming service Presto. The attempt to capitalise on the shift on the part of viewers to online viewing faces stiff competition from the giant US streaming service Netflix as well as other domestic rivals. The most attractive part of the business remains the Channel 7 TV operation with its lucrative advertising revenues.
The recent update on institutional entitlement offer with commitments of about $289 million in excess of $150 million has been pleasing. There has been a good response from institutional shareholders to the proposed transaction which may also lead to a strong balance sheet and an early resolution of Convertible Preference Shares.
Half Year Highlights (Source: Company Reports)
The interim results for the half year ended 27 December 2014 gave the evidence that the company is building on its television audience delivery leadership position when it achieved another advertising revenue performance underlining its market leadership. In an extremely difficult and competitive environment, the publishing business was also able to outperform its business peers. The company was also able to maintain strong margins which are among the best in the business in all significant media businesses and the result was cash flow generation from operations before interest and tax in excess of $250 million.
Income Statement (Source: Company Reports)
The underlying net profit was $137.5 million on revenues of $943 million, slightly below the indication at the AGM, although there was a statutory net loss of $993.6 million on account of the impairment of goodwill, the reduction in the carrying value of the publishing business as well as redundancy and restructuring costs. The total value of this charge was $1.148 billion made up primarily on account of impairment of goodwill including $960.9 million for the television business, $65.7 million on account of newspapers and magazines, $30.4 million on account of newspaper and magazine mastheads and licenses, $26.5 million on account of equity investees and $56.6 million on account of restructuring costs and onerous contracts. EBITDA came to $250.7 million and EBIT to $226.9 million. The company declared a fully franked dividend of 6 cents per share and, on the basis of the current outlook, the board intends to maintain the dividend at 12 cents per share for FY 2015.
The company is building up its presence in new forms of delivering content such as the Presto partnership, the successful launch of Hybrid Television, and live sports streaming. The focus on disciplined and stringent cost management will continue because it has already resulted in a 1.3% decline in total costs during this half year.
As per SWM, Performance in the half-year under review was stronger than the advertising market as a whole.
Performance (Source: Company Reports)
For FY 2015 market outlook as a whole, the company expects a slight decline in TV advertising while magazines will experience a more favourable trend and the present trend can be expected to continue in the case of newspapers. Leadership in the TV advertising segment continued during the half-year with a market share of 40.4% while market share in digital and magazines is expected to continue to grow. The company has reaffirmed its guidance for 1% cost growth in the group during FY 2015 and underlying profit should be in line with market estimates.
Metro FTA TV Advertising Revenue Market Share (Source: Company Reports)
The group aims to maintain its leadership position by providing the best content using economies of production scale, partnerships and acquisitions. It will make the best use of platforms to attract viewership for its content while providing digital offerings across all devices. The operating model has been transformed and a new management structure is now in place. New growth will be fuelled by expanded distribution and partnership, building a large portfolio of life events and using existing revenue streams to build new revenue streams. As part of the new management, Ryan Stokes, presently the Chief Operating Officer, will take over as CEO as the current CEO Don Voelte retires at the end of August 2015.Voelte will relinquish all existing directorships but continue to remain as a consultant on an exclusive basis. Stokes is regarded as an accomplished and highly capable executive who believes that, despite the existing difficult conditions, the group is in good shape for the future.
SWM Daily Chart (Source - Thomson Reuters)
Regardless of the headwinds across various businesses, we believe that the company and the group will continue to do well because of the strong leadership position and the ability to have growth with increased market share. In fact, we believe that the fall in the share prices over the last year provides a window of opportunity to acquire shares which we believe are currently undervalued. We thus put a BUY recommendation for the stock at the current price of $1.315.
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