Seven Network (SEV) Stock Recommendation

Seven Network (SEV) have a lifted share price valuation to $14.48 from stock analyst Macquarie Research Equities (MRE) after Seven shares surged yesterday by over 11 percent after their announcement of the formation of the "Seven Media Group". However, MRE cautions that it would be unlikely for the Seven (SEV) stock to trade at the target levels until an "accretive home is found for the cash on the balance sheet". The deal involves a 50/50 equity-interest joint venture with private equity group, Kohlberg Kravis Roberts (KKR), in a transaction that values the media businesses of SEV at $3.97 billion. Seven Media Group is structured in a way that 50% equity interests are owned respectively by SEV and KKR, houses 100 percent of SEV’s TV and magazine businesses, along with Seven's 50 percent share of the Yahoo!7 Joint Venture. KKR will pay $735m for its 50 percent equity interest in the new vehicle, implying a total equity value for the new ‘SMG’ vehicle of $1.47bn. The vehicle will then borrow ~$2.5bn to be remitted to SEV (along with the $735m for KKR's 50% stake) for total net cash proceeds to SEV of $3.2bn. The deal goes some way towards closing the gap on what was a significant valuation differential between SEV’s stock price and its fundamentals, reflected in the 11.5% movement of the shares yesterday. MRE considers the "prime motivation for the creation of the new group is to be ready to play in a heavy-duty rationalisation of the sector. Fairfax (FXJ) could be well within its sights."

Seven Network Limited is listed on the Australian Stock Exchange (ASX) under stock code SEV. You can view their investor website here. SEV was listed on the ASX on 12 August, 1993. David Leckie is the CEO of Seven. Seven (SEV) operates a collection of television stations across Australia. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. Check your charts and good luck with your share trading!