Seven stocks of the Media and Advertising Sector

 
WPP Aunz Ltd (previously STW Communications SGN)


WPP Details

Legal battle with Advangen:WPP Aunz Ltd (ASX: WPP) is formed with the merger of WPP Plc and STW Communications Group Limited. WPP has become the majority shareholder of STW with 61.5% holdings, and STW would be the primary vehicle for WPP in Australia and New Zealand. On the other hand, Ikon Communications Pty Ltd (Ikon), a subsidiary of the WPP has filed a legal action against Advangen International Pty Ltd. Ikon’s claim is for the amount of $939,055.65 pursuant to the Services Agreement entered into by the parties on 15^th June 2015. In its claim Ikon alleges that Advangen has failed to pay certain invoices for services rendered in relation to an advertising campaign. Advangen strongly disputes that Ikon has breached the Services Agreement, failed to provide certain services at all or adequately and engaged in misleading and dishonest conduct that has caused Advangen loss and damage. WPP stock has risen 67.3% in the last six months (as of August 17, 2016). Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $1.26

 
WPP Daily Chart (Source: Thomson Reuters)
 
Fairfax Media Limited


FXJ Details

Full year results:Fairfax Media Limited (ASX: FXJ) reported a drop of 0.6% in group revenue for continuing businesses to $1,830.5 m for full year 2016 with a decrease in group expenses by 0.3%. FXJ’s net profit also plunged 7.6% for continuing businesses. The payout ratio was at 70% with total dividend of 4 cents per share. Growing digital and non-print sources generated 42% of FY16 group EBITDA.
 

Segment Result (Source: Company Reports)
 
The company has recently reported that its Domain Group segment would incur significant items relating to non-cash impairments charges of $989 million pre-tax ($922.7 million post-tax) relating to publishing assets and these would be reflected in FXJ’s FY16 full year results. On the other hand, FXJ and APN has planned the merger of their respective New Zealand businesses. The stock has risen 8.6% in the last three months (as of August 17, 2016) and is trading ex-dividend on August 19, 2016. We maintain a “Buy” recommendation on the stock at the current price of $1.015
 

FXJ Daily Chart (Source: Thomson Reuters)
 
Seven West Media Ltd


SWM Details

Growth from Digital Division:Seven West Media Ltd (ASX: SWM) has met the FY 16 full year guidance with Profit after tax of $207.3m (excl. significant items) falling 0.9%. Moreover, Olympics is expected to underpin the robust Television market share growth for SWM. The program sales and 3^rd party productions are expected to deliver greater than 25% growth and the Digital is expected to deliver greater than 150% revenue growth.
 

Fiscal year of 2016 results (Source: Company Reports)
 
Additionally, SWM is expanding its presence in the creation of content in international markets with an investment in a British drama production company, expanding production into New Zealand and is currently progressing with several opportunities in other territories. SWM’s production portfolio is continuing to grow, securing major commissions including My Kitchen Rules for the UK and US and Border Security for the US. In addition, SWM is expanding its presence in the delivery of content anywhere, anytime, on any screen with the launch of live-streaming and rapidly expanding digital portfolio. Recently, the Australian Competition and Consumer Commission released a Statement of Issues on the proposed acquisition of The Sunday Times and perthnow.com.au from News Corporation by West Australian Newspapers (WAN), a wholly owned subsidiary of Seven West Media. We give a “Hold” recommendation on the stock at the current price of $0.795
 

SWM Daily Chart (Source: Thomson Reuters)
 
Southern Cross Media Group Ltd


SXL Details

Renewal of the Agreement: Southern Cross Media Group Ltd (ASX: SXL) (SCA) and Ten Network Holdings have renewed the affiliation agreement for the supply of TEN programming to SCA for its Northern NSW television license area. The new agreement is for a term of five years from 1^st July 2016 at an increased license fee. Accordingly, the group would continue to broadcast TEN’s highly successful programs like MasterChef Australia, The Bachelor Australia, Offspring and the KFC Big Bash League across Australia’s most highly populated regional license area. On the other hand, the advertising market still looks to be challenging with the group facing competition from other digital channels. We give an “Expensive” recommendation on the stock at the current price of $1.23 , ahead of its FY 16 result on 25^th August 2016.
 

SXL Daily Chart (Source: Thomson Reuters)
 
Ten Network Holdings Limited


TEN Details

Agreement with WIN Network:Ten Network Holdings Limited (ASX: TEN) has signed a new regional television affiliation agreement with WIN Network to broadcast TEN’s premium content and channels across regional Australia. According to which, WIN would bring TEN’s highly successful local and international programming, including MasterChef Australia, The Bachelor Australia, Offspring, Formula One and the KFC Big Bash League, to regional viewers in Queensland, Southern NSW, Victoria, Tasmania, South Australia, Western Australia and the Australian Capital Territory.
 

Television Performance (Source: Company Reports)
 
Moreover, TEN and Southern Cross Media (SXL) (SCA) has renewed the affiliation agreement for the supply of TEN programming to SCA for its Northern NSW television licence area. Meanwhile, the stock has risen 27.75% in the last six months (as of August 17, 2016) placing the stock at higher levels. The company is making a lot of changes to its board. Moreover, the stock is removed from S&P/ASX All Australian 200 Index from June 17, 2016. We give an “Expensive” recommendation on the stock at the current price of $1.255
 

TEN Daily Chart (Source: Thomson Reuters)
 
Nine Entertainment Co Holdings Ltd


NEC Details

Signing a new regional television affiliation agreement: Nine Entertainment Co Holdings Ltd (ASX: NEC) has signed a new regional television affiliation agreement with Southern Cross Austereo (SCA) for which SCA would pay Nine an affiliation fee of 50% of its television revenue. This is a five-year agreement in which SCA would broadcast Nine’s metropolitan free-to-air television content into regional Queensland, Southern NSW and regional Victoria from 1^st July 2016. As part of the deal, Nine and SCA would work together on a number of opportunities to mutually grow their businesses. Additionally, NEC has completed $106 million of the first $150 million buy-back and has finished $5 million of second $150 million buy-back. In addition, NEC’s sale of Willoughby site would complete by October 2017, and the proceeds would boost the group’s capital position. Meanwhile, NEC stock has fallen 24.82% in the last six months (as of August 17, 2016). We give a “Hold” recommendation on the stock at the current price of $1.03 , ahead of its FY 16 result on 25^th August 2016.
 

NEC Daily Chart (Source: Thomson Reuters)
 
News Corp


NWS Details

Revenue surges slightly in fourth quarter of 2016:News Corp (ASX: NWS) announced that its financial year ending June 30, 2016 witnessed a revenue drop of 3% to US$8,292 million while net income was up 222% to US$179 million. The company in its fourth quarter ending 30^th June, 2016 has reported 5% increase in revenue to $2.2 billion as compared to $2.1 billion in the prior year. This is due to the negative impact from foreign currency fluctuations of $54 million. NWS’s total segment EBITDA is of $361 million, which includes a one-time litigation settlement gain of $122 million, as compared to $215 million in the prior year. The Digital Real Estate Services segment revenue reported a 21% growth as compared to the prior year and is expected to become the biggest contributor to EBITDA in the future. The Digital revenues represented 23% of News and Information Services segment revenues in Q4 2016, compared to 19% in the prior year. On the other hand, we believe the stock would continue to face challenges owing to currency fluctuations for the coming periods and we give an “Expensive” recommendation on the stock at the current price of $18.46
 

NWS Daily Chart (Source: Thomson Reuters)

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