Seven West Media Limited (ASX: SWM)

Continued growth in earnings: The Seven West Media Ltd (ASX: SWM) seems to be losing the charm that it gained in last few days by falling about 7.3% on May 15, 2018. This fall is attributed to the neutral sentiment that is gaining momentum across the market. As known, SWM is Australia’s largest content producer creating over 60% of Seven’s primetime schedule. It focuses on improved ratings and revenue performance and on growing returns on its investment in content. It continues to invest in data, automation and targeted advertising to maximise inventory yield. SWM is the premium producer of the sports content in Australia as it covered Winter Olympics, Australian Open, AFL and Commonwealth Games and is setting new standards for the cricket coverage in the next six years. For Australian Cricket, it means a lot and it will be provided with one of the Australia’s best Network and with the best sports partners. SWM has secured the dominant Winter and Summer sports with AFL to 2022 and Cricket to 2024 and aims to strengthen audience position in Eastern states while improving audience demographic profile.

It successfully launched 100%-owned OTT platform 7plus, and earnings growth is expected to be underpinned with series deals. EBITDA has grown at a CAGR of +12% since FY12 and the group is vouching fora double-digit earnings growth in FY18. It expects that Net Debt will be c.$650 million at FY18 as it maintains its focus to improve balance sheet flexibility.


Identified Savings Benefit (Source: Company Reports)

The group’s TV segment has about 32.9% of total market share, representing the highest ever share any network has had nine weeks into the ratings season. On the other hand, the underlying profit after tax grew by 5.1% to $100.7 million in 1HFY18. The group delivered revenue of $811.3 million (including share of associates), which was down 10.4% as compared to previous corresponding period. Meanwhile, the company has reaffirmed the full year 2018 guidance and expects Group EBIT in the range of $220 to $240 million. Overall, while the group is expected to benefit from cricket rights and TV segment, the print business has been a drag.

Recently, the Company announced that John Driscoll has stepped down from the position of CEO of Seven West Media WA. Mr Stokes, the Chairman reluctantly accepted Mr Driscoll’s decision to step down, on the understanding that this would not preclude Mr Driscoll and Mr Stokes from working together in the future and a new leader will be announced soon. This did come as a surprise to the market.

With many positive events, the stock was up by 23.97 per cent in last six months, followed by a rise of 44.23 per cent in the last one month. Based on business potentiality and other developments, we give a “BUY” recommendation on the stock at the current market price of $0.695.

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