Fairfax Media Ltd

FXJ Details
Weakness in FY17 year to date group revenues: Fairfax Media Ltd (ASX: FXJ) recently disclosed that a letter has been received from a third party for the acquisition of Fairfax New Zealand business but FXJ is not engaged in any discussions with the party. Rather, FXJ is working with NZME Holdings Ltd and has entered into a merger implementation agreement with the latter for the New Zealand business. The group reported a slight improvement in business over its FY16 results. FY17 year to date overall group revenues for continuing businesses are 6% to 7% below last year. Domain’s overall revenues are up 2% with its total digital business up 11%. Domain’s H1 EBITDA is likely to be slightly below the prior corresponding period due to listing softness and continuing investment in the business. Group’s Metro Media is down around 8% while Australian Community Media is down ~10%. New Zealand Media is down around 4% including currency impact while Macquarie Media is down around 1%. But, the company has taken various cost cutting initiatives. During FY16, Australian Metro Media achieved 17% growth in digital subscription revenue while Australian Community Media achieved 12% cost improvement. New Zealand Media achieved 36% digital revenue growth and 11% growth in Stuff.co.nz audience to 2 million. Furthermore, the company has been establishing strong position in real-estate ecosystem through acquisition of strategic stakes in Homepass, Beevo, Oneflare and Comare & Connect. The Group has sold TenderLink business to Dun & Bradstreet Australia; while the group generated 2.3x return on investments. The stock has risen 11.9% in last one month (as at December 12, 2016) while we rate the stock as a “Buy” at the current market price of $ 0.86

 
FXJ Daily Chart (Source: Thomson Reuters) 

Enero Group Ltd

EGG Details
Softness in first quarter of FY17:Enero Group Ltd (ASX: EGG) has acquired Eastwick Communication and purchase consideration includes initial cash payment of US$5 million. Management expects the acquisition to be EPS accretive over 12 months. The company has funded the acquisition from Enero’s existing cash reserves. The company updated that its 100% subsidiary Naked Communication will be no longer under a retainer arrangement with Virgin Atlantic Airways effective March 31, 2017. Virgin accounts for 7% of Enero’s revenues.
 

Financial Performance (Source: Company Reports)
 
In FY16, EGG’s international markets UK and Europe had excellent performance with revenues up by 7% and operating EBITDA by 21%. Australian operation achieved a 2% increase in operating EBITDA despite a decline of 14% in revenues. The US business reported a 12% revenue growth and operating EBITDA growth was 55%. Recently, the stock has fallen down owing to softness in performance for three months ending September 2016. The net revenue has been down 14% while operating EBITDA slumped 40%. The first quarter of FY17 was also impacted by a decline in UK trade conditions. Given the limited prospects, we believe that the stock is “Expensive” at the current price of $ 0.82

 
EGG Daily Chart (Source: Thomson Reuters) 

QMS Media Ltd

QMS Details
Growth through acquisition: QMS Media Ltd (ASX: QMS) recently announced for successful completion of institutional placement and received commitments to raise $20m. The group is investing in strategic media and technology assets which seem to complement and enhance the company’s media offering. The company acquired 80% stake in Out and About Marketing & Media (OAMM) for $10 million plus acquisition of $1.25 million in debt. The company has 50% equity in LIVE docklands, which holds rights to Internet protocol television, Wi-Fi and concourse signage at Melbourne’s Etihad stadium. The company acquired a 20% stake in a leading Australian developer of sporting apps across AFL, NRL, Soccer, Rugby Union, Cricket, NFL, EPL and NBA for $1.1 million. The investment in acquisition and transaction costs of $22.4 million was funded by a $20 million institutional placement and balance by debt. Acquisitions are forecasted to contribute a $3.8 million EBITDA in FY18 and will be EPS Accretive in FY18. We give the stock a “Speculative Buy” at the current market price of $ 1.07

 
QMS Daily Chart (Source: Thomson Reuters) 

Prime Media Group Limited

 

PRT Details
Concerns over second half performance:Prime Media Group Ltd (ASX: PRT) reported that the revenues in the three aggregated regional markets of New South Wales and Victoria for the first quarter improved 16% year on year (yoy) compared to the regional market. Considering the growth factors, the company expects H1FY17’s net profit in the range of $15.3 million - $16.3 million. 
 

Financial performance (Source: Company Reports)
 
However, the group does not forecast a similar growth in second half of 2017 financial year. The group also indicated a threat from international players. Given the concerns over the performance, we feel PRT is “Expensive” at the current market price of $ 0.29

 
PRT Daily Chart (Source: Thomson Reuters) 

Seven West Media Ltd

SWM Details
Acquisitions to benefit: Seven West Media Ltd (ASX: SWM) had acquired the Sunday Times and the online site PerthNow, and the investment have been said to be earnings accretive in first year and to enhance shareholder value for the group. Under the acquisition agreement, Seven West Media and News Corporation would build on a news content sharing agreement for the West Australian with News’s daily brands. Further, NEWZULU signed a multiproduct deal with Seven West Media and this would allow SWM to crown-source videos and photos from its public audience. SWM is a significant shareholder in NEWZULU following acquisition of an 18.53% shareholding via the Cornerstone Investor Placement in April 2016. However, SWM commented on limited visibility for the television advertising market, and underlying EBIT for first half year 2017 will be lower owing to impact from Olympics rights. We recommend a “Hold” for the stock at the current market price of $ 0.75

 
SWM Daily Chart (Source: Thomson Reuters) 

Southern Cross Media Group Ltd

 

SXL Details
Agreement with AFL: Southern Cross Media Group Ltd (ASX: SXL) had reported a 5.1% rise in revenues to $642.3 million while EBITDA rose 2.8% for fiscal year of 2016. Net profit was higher by 19.1% to $77.2 million. The company reduced net debt by 32.9% to $340.2 million. Regional radio was up by 6.1%, reporting growth in advertising. The company has divested non-core assets and realized $16.1 million in cash. Southern Cross Austereo announced that it has entered into a new six-year agreement with the AFL for the radio broadcast of AFL games and other AFL events on the Triple M Network and affiliated regional stations. On the other hand, Nine Entertainment sold its entire 9.99% stake in Southern Cross Media Group at a price of $1.54 per share. Rising competition, declining FTA market remain a concern over the stock which fell over 10% in the last three months (as of December 12, 2016). We feel the stock is “Expensive” at the current market price of $ 1.39

 
SXL Daily Chart (Source: Thomson Reuters)

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