Saturday 21 January 2017

INM undervalued, Davy Stockbrokers tells investors

Published 24/08/2016 | 02:30

Journalists and reporters were nominated for excellence in their field
Journalists and reporters were nominated for excellence in their field

Shares in Independent News and Media (INM) are undervalued and the company is forecast to have built up a cash balance of €84m by the end of the year, according to Davy Stockbrokers.

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INM, which publishes the Irish Independent, 'Sunday Independent', 'The Herald' and other market-leading print and online publications, will report financial results for the first half of 2016 on Friday.

In a preview of the results yesterday, Davy's Robert Stokes said that broader trends paint a bleak picture for the newspaper industry generally but that INM's ability to grow its digital business as well as to unlock the latent potential in its national distribution business will ensure growth at the top and bottom line for the company.

INM trades on a multiple of less than two times its 2017 enterprise value divided by earnings before interest, tax, depreciation, and amortization (EV/Ebitda), he said.

"We continue to believe that INM is undervalued and that management's ability to grow underlying earnings has not been rewarded," Davy said in a note circulated to clients.

The broker said it is forecasting top-line growth of 1.5pc in the first half of the year, when figures are published on Friday - anticipating that growth in the digital and distribution businesses will offset print declines.

Davy said it is also expects earnings growth of €17m in the period.

In relation to the cash pile built up by INM, Davy said the company may have to rethink its strategy following the UK vote in June to exit the European Union, because deals may be harder to find. INM has earmarked the cash for acquisitions, especially of young digital business that would benefit from INM's greater scale. INM shares closed up 2.877pc at 14.3c.

Irish Independent

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