Seven West Media Ltd

Seven West Media Ltd (ASX: SWM) over the last two years, has progressively taken control of the key digital assets across the company. These owned and operated products have delivered 100% revenue growth to approximately $40 million in FY17. Seven also delivered a 39.2% commercial share of audience and 40.2% metro revenue share with total advertising revenue for the business edging up 1% on FY16.

While the results overall were quite disappointing with loss being reported at the back of tough market conditions, the group now focusses on ensuring efficiency, reducing costs and driving growth in shareholder value. Year 2018 has been earmarked for having better content while the group aims to maintain its audience. The launch of 100% owned OTT platform, 7Plusis also expected to benefit the group this year.

Recent partnership with Newzulu Limited (ASX: NWZ) on building a new app which will allow Seven to engage their live audiences by collecting user-generated content at the largest sporting events for which they have broadcast rights, is also expected to favour the group.

Additionally, SWM in FY18 expects the underlying EBIT tostocks be in the range of $220m to $240m in line with expectations. The group now aims to capture greater share of the total video market with growth in digital business and better returns from global production business. The group has also indicated for at least $30 million of cost savings to offset the step up in AFL rights costs and a further $25 million of annualized recurring cost savings from headcount reductions, to commence in FY18. Another $50 million of cost savings in 2019 is expected from the roll off of the major sports rights.

Meanwhile, SWM stock has fallen 6.25% in three months as on January 12, 2018. We expect some stock consolidation in long-term at the back of the boost from digital business, cost-savings initiatives and renegotiation of an affiliate agreement by FY19.

Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $0.595

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