A new future for APN News & Media
Following the proposed demerger, NZME will focus on the continued integration of publishing, radio, and digital brands and is likely to merge with Fairfax’s New Zealand operations by the end of 2016. The demerged entity is projected to have revenues of $803 million and earnings of $141 million.
We believe APN’s decision to spin off NZME makes sense as there is limited operational overlap between APN and NZME. We think the market will attribute a higher earnings multiple to the APN business post demerger as the market focuses on the quality of the assets and strategic importance of the remaining businesses.
Shareholders are scheduled to vote on the demerger and a share consolidation In June and given the market’s positive reaction (APN shares climbed 11% following a four-day trading halt on the announcement), we expect this to be approved.
We expect the company will grow its net profit by close to 10% this year, which puts it on a price to earnings (PE) ratio of 8.5 times.
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