Publishing & Broadcasting Limited (PBL) Update

Submitted by Craig Strzelecki on 5 April, 2007 - 18:01

Publishing & Broadcasting Limited (PBL) have a Neutral 1 share trading recommendation and a lower price target of $22.60 per share (previously $23) from analyst UBS. PBL to invest in Canadian casinos: New World Gaming [50% PBL/Macquarie] has bid for all of Canada's Gateway Casino Income Fund (at a total cost of A$1.446bn) as well as unlisted Star of Fortune Gaming Management and Gateway Casinos Inc. Together, the groups operate 7 casinos in British Columbia and 2 in Alberta. The anlayst estimates an acquisition EV/EBITDA of ~13x consensus '07, albeit most of the facilities are currently undergoing significant refurbishment/expansion. The proposal is via New World Gaming, a 50% joint venture with Macquarie. They expect this could become the vehicle for future investments in the North American market, with Las Vegas one area we believe holds significant appeal to PBL. The anlyst have not yet incorporated the Canadian casinos into our PBL forecasts. However, we are now incorporating our UBS HK Melco-PBL forecasts into our PBL model [previously UBS Aust forecasts] and similarly incorporate the current Melco-PBL share price into our target price [previously the average of the UBS Aust valuation and IPO price].Their target price is derived as our '08 based sum of the parts. With the recent bounce in the PBL share price, our rating remains Neutral 1.

Meanwhile, market analyst Citigroup Investment Research have observed the same deal with Publishing & Broadcasting (PBL): Canadian casinos to be acquired offer a high-margin, low-risk option on further expansion and favourable regulatory outlook in the Western Canadian Gaming Market. Annualised acquisition multiple for the listed CGI of circa 13 times EBITDA - but with likely material growth from further expansion of 4 of its 7 properties over the next 2 years. Star of Fortune also offers a significant development of a new casino in BC, which is almost complete, adding to future earnings outlook. PBL's casino operational experience, and relatively small equity investment indicate that the deal could easily have been undertaken by PBL itself. Citigroup Investment Research suspect that similar to the recent Tattersalls / MBL JV in the UK, MBL promises a pipeline of further acquisitions in North America, which PBL is potentially unlikely to exploit as rapidly alone as it can with a partner who shares in the profitability. The BC Provincial Government is driving the consolidation of the casino market into fewer larger properties, and re-finances the majority of the capital investment in property development, creating a very favourable climate for further investment. The analyst have not reflected any earnings impact of the proposed transaction at this stage. Assuming agreement by CGI unit and debenture holders, and regulatory approvals, the transactions are expected to close late in 2QCY07 or early 3QCY07.

Publishing & Broadcasting Limited is listed on the Australian Stock Exchange (ASX) under stock code PBL. You can view their investor website here. PBL was listed on the ASX on 4 June, 1987. James Packer is the Executive Chairman and the managing director is John Alexander. Publishing and Broadcasting (PBL) is involved in gaming and entertainment; television production and broadcasting; magazine publishing and distribution; investments in the internet, pay television; telecommunication and other media and entertainment sectors. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade PBL. Check your charts and good luck with your share trading!

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