Seven West Media Limited

SWM Details

Trading Update: Seven West Media Limited (ASX: SWM) is one of Australia’s most prominent media companies, which is engaged in content production across broadcast television, publishing and digital. As per the recent trading update, Broadcast video on demand (BVOD) market growth continues to be strong and witnessed a rise of 41% in Q3FY22 on a YoY basis, and the Free to Air (FTA) market grew 6.7% in Q3 on a YoY basis.

Insights of 1HFY22: The below picture provides an overview of the company’s performance in 1HFY22:

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to risks arising from the rising market share of peers, loss of subscribers and regulatory risk, etc.

Outlook: On the back of decent trading conditions, SWM has upgraded EBITDA guidance in the range of $335 million to $340 million for FY22. With respect to Seven Digital, the EBITDA forecast increased to over $130 million for FY22.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of SWM is trading below its 52-week low-high range of $0.375 - $0.815, respectively. The stock has been corrected by ~27.44% in the past month. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers, considering the COVID-19 uncertainties and falling margins, etc. For valuation, a few peers like HT&E Ltd (ASX: HT1), Nine Entertainment Co Holdings Ltd (ASX: NEC), and Ooh!Media Ltd (ASX: OML) have been considered. Considering the expected upside in valuation, rising topline and bottom line, optimistic long-term view, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $0.480, down by ~4.000% as of 01 June 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

SWM Daily Technical Chart, Data Source: REFINITIV 

Southern Cross Media Group Limited

SXL Details

Key Points from Trading Update: Southern Cross Media Group Limited (ASX: SXL) is engaged in the creation of audio content for distribution on broadcast (AM, FM, and DAB radio) and digital networks. SXL experience revenue growth of 5% from the audio segment during Jan-April 2022. The digital audio market grew 48% in Q3FY22, and the company is monetising in line with the market.

1HFY22 Summary: The following picture gives an idea of the company’s performance in 1HFY22:

Financial Summary (Source: Analysis by Kalkine Group)

Key Risks: The company’s performance could be impacted by uncertainties in relation to COVID-19. SXL is exposed to risks arising from the rising competition in the market.

Outlook: For FY22, the company expects EBITDA in the range of $85 million- $90 million. In addition, Television segment revenue is likely to be in the range of $125 million - $130 million.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks

Stock Recommendation: The stock of SXL is currently trading near its 52-week low level of $1.380, offering a decent opportunity for accumulation. The stock has been corrected by ~17.26% in the past month. The stock has been valued using a P/E Multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers, considering the COVID-19 Led uncertainties and fall in earnings, etc.  For the purpose of valuation, peers such as Nine Entertainment Co Holdings Ltd (ASX: NEC), HT&E Ltd (ASX: HT1), and Ooh!Media Ltd (ASX: OML) have been considered. Considering the expected upside in valuation, rising revenue, strengthening markets, optimistic long-term outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing market price of $1.390, down by ~2.112% as of 01 June 2022.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

SXL Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in stock prices tend to find resistance when they are rising, and a uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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