News Corporation Update

News Corporation will re-enter the S&P/ASX indices – 50, 100, 200 and 300 on Friday 15th June. Macquarie Research Equities analysts estimate that this will equate to approximately 12.26 million shares (average daily volume of NWS shares is approximately 2.64 million). In addition to this positive catalyst, they have revised their earnings forecasts for FY08 and have subsequently upgraded their valuation target following a recent trip to visit News Corporation's (NWS) international operations in Italy, the UK and the US. They believe that very strong growth numbers into FY08 will ultimately drive the stock price closer to their valuation of A$39.49. The stock is currently trading at $28.30, representing an almost 40% discount to their target price. As a result of the trip, they have made a number of adjustments to our earnings forecasts and valuation for News Corporation. They have downgraded their EPS for FY08 by -6.7%, so that EPS growth is now forecast to be 25.4% in FY08. The analysts' EBIT growth forecast is now 19%, compared with 21% previously in FY08, so that EBIT for FY08 is forecast to be US$5,335m. However, these downgrades are dwarfed by the lift in the valuation arising from the roll-over to FY08 forecasts, which amounts to a 6% lift in the valuation of NWS voting stock to A$39.49 (translated at the spot AUD/USD exchange rate of US84¢). News Corporation is now more than A$10 below the analysts' sum-of-the-parts valuation, as concerns about the Australian dollar and acquisitions by the company overshadow the much more important story of growth in earnings and cashflows. For the past three years, News Corporation has grown EPS at a compound rate of 25.3% pa. Catalyst: Strong growth from a number of divisions will drive share price performance going forward, combined with continued capital management initiatives.The rising Australian dollar (which renders the US$ earnings stream of News Corporation less valuable) is clearly hurting the stock price of News Corporation. But they believe that very strong growth numbers into FY08 will ultimately drive the stock price closer to the analysts' valuation of A$39.49.

News Corporation Limited is listed on the Australian Stock Exchange (ASX) under stock code NWS. In November 2004, The News Corporation Limited underwent a reorganisation and redomiciled in the United States. That company's securities ceased trading under the ASX codes NCP and NCPDP on 3 November 2004 and commenced trading the following day as an American company under the new name News Corporation, Inc. Securities based on those American shares still trade on ASX, as Chess Depository Interests under the codes NWS and NWSLV. For any announcement in relation to the former Australian company (The News Corporation Limited) please use the code NCP. For any subsequent announcement by the American-based News Corporation, Inc. please use the code NWS. You can view their investor website here.NWS was listed on the ASX on 4 November, 2004. News Corporation is a Diversified international media and entertainment company. Rupert Murdoch is the appointed Chairman, Director, Managing Director. Read previous stock recommendation for News Corporation (NWS).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!