Friday, June 6, 2014

Ideas For The Week of 6-Jun-14

Those looking into some catalyst might want to ponder over these names for the week. I have done research on few of them, the other I have read online on Barron’s and other publications

Time Inc (TIME): Time Warner (ticker: TWX) decided to spin off Time Inc. which started trading trading on when issued basis. The shares will be distributed on June 6, with the ticker: TIME.  At USD 21, or about 10x FY14 EBIT before restructuring charges of $2.13 a share. That estimate is from Morgan Stanley analysts carry a fair-value range for the stock of $23 to $25 a share. Time's FCF yield is above 10%, reflecting modest capital expenditures of around $35 million annually. The company is targeting an annual dividend equal to 30% of FCF.  Considering the prominence of its publications and a venerable history dating back to its founding in 1922, Time has a modest market value of $2.4 billion, making it a possible takeover candidate down the road. Under its new CEO, Joseph Ripp, the company is moving to address these issues and cut costs, including workforce reductions and real-estate savings. Time incurred $63 million of restructuring charges in 2013 and it expects another $150 million in the first half of this year. The layoffs reflect increasing austerity at an organization once known for being a cushy place for journalists. Time is moving its headquarters from the Time-Life building in midtown Manhattan, in the hope to save $50m yearly from lower rental expense, although it expects to incur $120m to develop the new space.

Gannett (ticker: GCI) at recent $28, is trading under 11x earnings. GCI’s majority of profits come from local TV stations, thanks to a $2.2bn deal last year for Belo Corp. Meanwhile, all of Gannett's 80 local papers, from the Argus Leader, in Sioux Falls, S.D., to the Great Falls Tribune, in Montana, now have a pay wall in front of their Websites. The strategy has helped stabilize revenue at the publishing unit, just as an improving economy, political ads, and licensing fees are boosting broadcast operations. Total sales are likely to rise 15% this year to $6bn. Broadcast is an increasingly larger part of the company. GCI paid $215m for six Texas TV stations; the purchase comes five months after the company closed its much larger Belo deal, which brought 17 big-market stations into the fold. In all, the company will have 46 stations across the country. This year more than 50% of GCI’s $1.5bn in Ebitda will come from television.  Local station groups are increasingly insisting on big payments from pay-TV operators to carry their signals. The so-called retransmission fees were at the center of last year's dispute between Time Warner Cable (TWC) and CBS (CBS), which owns local stations in large markets. CBS ultimately forced the cable company to double its payments to $2 per subscriber. In 1Q, GCI's own retransmission fees jumped 66%. GCI still benefiting from its investment in On a sum-of-the-parts basis, Gannett's is probably worth $34 -- 20% and could reach $40.

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