Its $6.60 peak coinciding with the American NASDAQ Index record high in March 2000.But it may have begun its recovery with a bounce off its recent $2.63 low to its current price of $3.26.
Price movement
It would be fair to say that John Fairfax Holding's share price decline has been as a result of the excessive valuations for Internet companies in the "tech boom". Its $6.60 peak coinciding with the American NASDAQ Index record high in March 2000.But it may have begun its recovery with a bounce off its recent $2.63 low to its current price of $3.26.
Profile
John Fairfax is Australia's leading publishing group, encompassing newspapers, business media and its internet f2 network. Newspapers include the Herald and the Melbourne Age as well as regional and community-based newspapers. Its business media division includes The Australian Financial Review and the BRW, Shares and Personal Investor magazines. The f2 internet division has been a costly exercise thus far and it has recently been downsized, however management is forecasting a profit for the current year.
Current details
Fairfax possesses a premium (FY 2003 P/E 24) built into its share price due to its strategic value in having premier positions in Sydney and Melbourne, where it generates a strong cash flow from its classified advertising. It also would benefit from amendments to the foreign and cross-media ownership laws to be debated in Parliament this year. It could cross-subsidise TV or radio from its print media resources. It is doing this through its f2 internet division.
Sector Advertising revenue is the lifeblood of all media companies. Fairfax's management recently lifted its forecast for first-half earnings to 20 per cent due to increased advertising. Although conditions are expected to remain tough, management has a commitment to cost control to help maintain profits. The changing habits of consumers have caused a declining trend in newspapers and a growth in TV revenues. This has been occurring over the past two decades and, alongside internet growth, now makes media laws somewhat outmoded. If they are amended, there is likely to be a rapid change in the TV, radio and print media companies listed on the ASX. It is also likely that greater overseas ownership could attract new investors.
Worth buying?
The company will be a sought-after asset because of both its strong cash flows and its strategic positioning in the event of a change in media laws. This expectation has been factored into its price (high P/E), however the company still pays a 3.7 per cent franked dividend, which would compensate the patient investor over the next two years.
Disclosure of interest: Geoffrey Hill is a paid contributor to the Money Manager section of The Sydeny Morning Herald.
Geoffrey Hill is a presenter of ABC News Radio's daily afternoon finance report and is an independent private client adviser. Email gh@ghill.com.au
