By Chris Shaw<\/p>\n
Last year was almost a perfect one for TV networks in Australia as the
\neconomy was still growing strongly and the Federal election meant there
\nwas plenty of advertising to go around. But six months on and things
\nhave clearly changed as Ten Network ((TEN)) last Friday surprised the
\nmarket by lowering earnings guidance, with management citing a tougher advertising market as the principal reason for the shortfall.<\/p>\n
While the group delivered a 3Q EBITDA (earnings before interest, tax,
\ndepreciation and amortisation) result of $38.2m, which Macquarie notes
\nwas in line with expectations and Credit Suisse suggests showed some
\ngood results in terms of cost control, it was the downgrade to full
\nyear guidance that saw the share price sold-off.<\/p>\n
Management has indicated full year EBITDA from the group’s television
\ndivision is likely to come in around 10% below last year’s $237 million
\nand this implies a final quarter result of around $16 million, down
\nfrom a little over $53 million for the same period last year.<\/p>\n
As Deutsche Bank points out, the problem for Ten is a combination of
\nlower ratings as flagship programs such as Big Brother struggle and
\nreduced advertising spending generally, with last year’s advertising
\nspending during the election also creating tougher comparables for this
\nyear. The other problem Macquarie notes is the company simply doesn’t
\nhave enough growth drivers in its business to lift earnings in periods
\nwhen advertising falls or slows, which implies the impact of such a
\nslowdown is felt more by Ten Network than some of its rivals.<\/p>\n
Credit Suise makes a similar point as by factoring in a tougher
\nadvertising market into its estimates for other networks such as Seven
\nNetwork ((SEV)), which is the only one likely to benefit from the
\nupcoming Beijing Olympics, and Consolidated Media Holdings ((CMJ)) the
\nearnings impact for both stocks is only minor and means no changes to the broker’s respective valuation or price target.<\/p>\n
But for Ten the broker has slashed its earnings estimates by 15.7% this
\nyear to 11.7c and in FY09 by 16.7% to 11.3c, while Macquarie has cut
\nits numbers by 13.7% and 24.2% respectively to 11.2c and 9.5c,
\nhighlighting just how much more vulnerable Ten is in the current
\nenvironment. Consensus earnings forecasts for the company according to
\nthe FNArena database now stand at 12c and 12.3c.<\/p>\n
The other issue for Ten according to ABN Amro is the tougher
\nadvertising market puts a recovery in earnings from the group’s Eye Corp outdoor advertising division at risk, as an expected reduction in start-up losses from the UK and US parts of the business is now less likely.<\/p>\n
As a result the broker has also cut its estimates significantly, with
\nboth FY08 and FY09 forecasts lowered by 17% to 10.9c and 10.5c. For the
\nbroker the issue is even after the share price declines last week the
\nstock is still not cheap, as on its numbers the shares closed at a P\/E
\n(price to earnings) multiple of around 16.9x FY09 earnings last week.
\nWith few obvious options to lift growth the broker retains its Sell
\nrating.<\/p>\n
BN Amro is not alone with such a view as the FNArena database shows seven
\nSell ratings compared to just two Holds, with an average price target
\nof $1.89, down from $2.27 prior to the update and a median price target
\nfrom last week according to Thomson One Analytics of $2.17.<\/p>\n
Shares in Ten Network today are weaker again in a mixed overall market
\nand as at 12.20pm the stock was 9c lower at $1.675. The stock has had a
\ntrading range over the past 12 months of $1.57 to $3.02.<\/p>\n","protected":false},"excerpt":{"rendered":"
Ten Network has lowered guidance for its TV division to reflect lower ratings and advertising spending and with forecasts cut accordingly brokers see little reason to be in the stock.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54345"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=54345"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/54345\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=54345"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=54345"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=54345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}