INM share price rises after Davy ups earnings forecast
Published 29/03/2011 | 05:00
INDEPENDENT News and Media (INM) saw its share price rise yesterday after Davy Stockbrokers increased its company forecasts for this year.
In a note to investors, Davy analyst Simon McGrotty said the firm was revising upwards its 2011 earnings before interest and taxes (EBIT) forecasts by 1.3pc to €89.7m from €88.5m previously. Forecasts for next year and 2013 have not been materially changed.
For the island of Ireland, Davy is forecasting that advertising rates will decline by 6.6pc in 2011, which is broadly in line with the rest of the sector.
While circulation volumes may continue to decline, circulation revenues will be "flat to marginally up year-on-year".
"We expect overall revenue to decline by 1.5pc on a full-year basis [but] operating costs [should] decline by 1.8pc in FY2011, despite an effective 20pc increase in newsprint costs," said Mr McGrotty.
"In South Africa, we are forecasting advertising rate growth of 4pc, which -- along with cover prices at least in line with inflation -- should result in revenue growth of 3pc in constant currency or 3.5pc in euro terms.
"Due to the higher inflationary environment, we are forecasting operating cost growth of 2.5pc in 2011. In constant currency, this means EBIT growth of 2.8pc, with a flat out-turn on margins.
"We expect diluted adjusted EPS of 12.4c in 2011, rising to 15.5c in 2013. This puts the stock trading on only 4.8 times 2011 earnings, making it one of the cheapest stocks in the Irish market but also in the wider European media universe," said Mr McGrotty.
INM is expected to have free cash flow of €53.7m in 2010, €60.1m in 2012 and €69.9m in 2013. At these run rates of cash generation, Davy believes the group will have net debt of less than €360m by the end of 2010, at which point net debt/EBITD will be 2.8 times, down from 4.3 times, at the end of 2010.
"We reiterate our 'outperform' rating, citing an undervalued stock, an under-appreciated geographic exposure, an expanding market share and a management team that continues to deliver on its objectives," added Mr McGrotty.
INM closed up 0.7pc at 60c.