Citigroup upgrades APN's rating to 'buy' after strong results
Published 01/03/2011 | 05:00
APN News & Media was upgraded to "buy" by Citigroup yesterday, following strong results from the Australasian media company on Friday.
Citi's Justin Diddams said shares in the company, which is 31.6pc owned by Independent News & Media, were now "trading at a significant valuation discount to the market" and that "near-term pressure on 'retail' advertisers and the New Zealand economy [should] ease into 2011".
"We believe the 'regional' based publications (30pc of APN's earnings before interest and taxes) continue to offer a strong proposition to SME advertisers in local areas who are poorly served by 'online', which is unlikely to change in the next two to three years, in our view.
"Regional press is heavily exposed to retail advertising but we believe the recent pressures on the category are temporary," he wrote.
Citi's upgrade follows strong annual results, which saw a return to growth for the financial year ending December 31 with underlying earnings up 9.5pc to A$103.1m (€76m).
Net profit after exceptional items and discontinued operations was up 1.2pc to A$93.8m (€69.2m), compared with A$92.6m for the prior year, while revenues were up 3pc to A$1.06bn.
Net debt was reduced from A$750m to A$657m.
As well as increasing its rating, Citi also rebased its target price for APN to A$2.10. The stock closed yesterday at A$1.75.
Given those results, Citi believes APN shares are "trading at a material discount to media peers on adjusted price to earnings basis in full year 2012. We believe the discount at current levels is unwarranted".
APN is one of the biggest media corporations in the region and controls numerous titles across Australia and New Zealand, including the 'New Zealand Herald', the country's best-selling daily.
Outside of publishing, the group owns some 130 radio stations in the region, broadcasting to some six million people every week.