In today’s daily we have covered stock research on Southern Cross Media (SELL).









 
The S&P 500 was down by 10.85points or 0.54%on Tuesday to 2010.05 points. Data on Tuesday pointed to slowing growth in the fourth quarter. The pace of expansion in services moderated in December and new orders for manufactured goods fell for a fourth consecutive month in November. An election in Greece, which may trigger its exit from the euro zone, is about three weeks away, increasing the difficulty for the European Central Bank to move towards quantitative easing as it attempts to stabilize the region's economy.

Southwestern Energy Co. and Range Resources Corp. fell at least 3.7 percent as energy shares tumbled a second day to a three-week low. JPMorgan Chase & Co. slid 2.6 percent to lead declines in the Dow Jones Industrial Average. TripAdvisor Inc. plunged 3.4 percent as Internet companies retreated. Energy companies in the S&P 500, which slumped 10 percent in 2014, dropped 1.1 percent.


J P Morgan Daily Chart (Source – Thomson Reuters)
S&P ASX 200 was down by 85.5points or  1.57 %on Tuesday and closed at 5364.8 points. Among Australia’s biggest dedicated oil and gas producers, Woodside Petroleum shed 4.9 per cent to $36.46, while Oil Search and Santos each dropped 8.6 per cent to $7.31 and $7.55 respectively. Resources giant BHP ­Billiton, which is the biggest oil producer in the country, fell 4.7 per cent to $28.11.
The big four banks were all lower. Commonwealth Bank of Australia and National Australia Bank each lost 0.8 per cent to $85.30 and $33.34 respectively. Westpac dropped 0.9 per cent to $32.87 while ANZ Banking Group lost 1.2 per cent to $31.78. Among other major blue-chip stocks, Telstra Corp slipped 0.7 per cent to $5.94. Woolworths fell 1.5 per cent to $29.80, while Wesfarmers, owner of Coles, shed 0.4 per cent to $41.70. SPI futures are down 30 points. Ore with 62 per cent content delivered to Qingdao, China, rose 0.9 per cent to $US71.49. No stocks will trade ex-dividend today.
 

Woodside Petroleum Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
 
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Stock of the Day - Southern Cross Media (SELL)

Southern Cross Media reported turbulent trading conditions with regards to performance in first quarter FY2015 owing to cycling tough comparatives. National revenues have been challenging although local markets were steady. SXL reports for 6% decrease in regional revenues and 14% decrease in metro revenues. The metro radio market share was stable but weak.


Statistics (Source – Company Reports)

The results for FY14 were affected by a number of significant items including a non-cash impairment charge of $393 million against the carrying value of regional assets. A net loss after tax of $296 million was reported after inclusion of the impairment charge. Net profit after tax before significant items was $80 million in concurrence with guidance of May 2014. This led the Board to declare a final fully-franked dividend of 3 cents per share, resulting in a full year dividend of 7.5 cents per share (fully-franked) to shareholders. The pay-out ratio of 66% (same as 2013) lies within the 60-70% range maintained by SXL over the last few years. SXL also reduced the net debt by $12 million in the year. The debt facilities have been refinanced with new 5-year facility through the end of 2018. The Company intends to reduce the gearing levels to ~2.5 times EBITDA. The underwritten Dividend Reinvestment Plan introduced to reduce the net debt is expected to be operated for the interim and final dividends for 2015.



Debt Covenants (Source – Company Reports)

The regional business entailing 72 regional radio stations and some regional television licenses (broadcasting Channel 10), was stable in FY14. The regional revenues increased by 0.5% owing to the slight stability seen in the regional television business. The Triple M network witnessed a successful year dominating male audiences in 25-54 age band with a huge national audience. SXL also commenced the regeneration process for Today network. The launch of ‘Fifi and Dave’ breakfast show in Melbourne has been successful and rated second to the Triple M ‘Hot Breakfast’. However, SXL reported that launch of new breakfast show in Sydney on the Today network has seen little turbulence.


Triple M Network Users (Source – Company Reports)

In FY14, metro revenues saw a dip to $249 million and were already expected to be further down in 2015. The Company holds a strong leadership position in digital space with number one radio group online and number one for social engagement. Strong growth in audience and engagement was translated into 17.3% growth in digital revenues. SXL also made over $20 million of annual cost synergies following the integration of the Austereo business in 2011. In FY14, the cost increased by 3.2% representing incremental investment in content and marketing to support launch of new breakfast shows and increase in television content affiliation fees.


Revenue Mix (Source – Company Reports)

The charitable initiatives including ‘Give Me 5 for Kids’ and ‘I believe in Christmas’ for raising funds for sick and underprivileged children across Australia performed well with former raising over $2.5 million in the year. Other highlight included changes at the Board.


AFL and NRL Tipping (Source – Company Reports)

Initial months of FY15 witnessed a good start owing to the Commonwealth Games offsetting the local sales challenges in Metro radio markets. Overall, local sales have been flat at the end of the first quarter. The Commonwealth Games did not attract national clients and SXL is yet to see a sustained improvement in CH10 ratings.


SCA Traffic (Source – Company Reports)

The regional radio witnessed a decline while the metro market share stabilized at between 28-29% but below expectations. Success of regeneration of the Fox brand in Melbourne and phenomenal growth in digital footprint, but below expectation performance by the 2DayFM breakfast illustrate a mix of sentiments.



H1FY15 Outlook (Source – Company Reports)

The H1FY15 outlook was conveyed with revenue forecast to be marginally contrary to August guidance range. EBITDA decline resulting from high operating leverage is another point to ponder over.


SXL Daily Chart (Source - Thomson Reuters)

Accordingly, we put a SELL recommendation for this stock at the current price of $1.17.
 

 
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