Fairfax Media (FXJ) Share Trading Recommendation

Submitted by Craig Strzelecki on 13 February, 2007 - 18:21

Fairfax Media (FXJ) have a Neutral 2 share trading recommendation and a price target of $5 from analyst UBS. Fairfax reported sales revenue of $1017m (4.1%,UBSe $1038.5m), EBITDA of $270.6m (+2.9%,UBSe$272.9m), normalised NPAT of $121.4m (+2.7%,UBSe $121.7m) and DPS of 10 cps (UBSe 8 cps). Management had previously guided to low single digit EBITDA growth. Australian Publishing EBITDA was down 2.1% (UBSe -5%) as slow ad markets, particularly in NSW, combined with the impact of higher newsprint prices. Rel to UBSe, revenues were around $10m lower, but offset by lower costs. Conversely, NZ profits were well short of UBSe, with NZ$90.3m of EBITDA, down 8% cf UBSe a 2% decline. The 2.4% decline in ad revenues the key driver. Online revenues (ex TradeMe) grew by 43.7% (UBSe +43%) and EBITDA grew 42% to $17m, margins remaining constrained by business investment. TradeMe's contribution was NZ$23.3m on an estimated revenue base of NZ$35m, slightly ahead of UBSe. The analyst expect much of the final NZ$50m installment will be paid this half. The analyst's 12-month target price is $5.00, which is set between the average of our DCF, sum-of-the-parts and P/E of $4.70 and our LBO-based valuation of $5.25. On a like basis, and incorporating our estimate of synergies, the RUP merger would add ~30c, or 6%, to our valuation.

Fairfax (John) Holdings Limited is listed on the Australian Stock Exchange (ASX) under stock code FXJ. You can view their investor website here. FXJ was listed on the ASX on 8 May, 1992. Ronald J Walker is the Chairman of Fairfax and David Kirk the CEO of this media company. Fairfax is involved in information and entertainment publishing in newspaper, magazine and electronic formats. 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!

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