This week investors have had the opportunity to review the latest results from both News Corp (ASX: NWS) and REA Group Limited (ASX: REA).
It's really quite amazing how little attention investors appear to have paid to News Corp since the company structure was reorganised one year ago. It actually reinforces a point I made in this article that Australian investors are not maximising their opportunities to expand their investment universe through dual-listed structures on the ASX.
REA Group reported impressive results with both strong top line and bottom line growth. It was a great result for REA's shareholders…
And guess who REA's largest shareholder is?
News Corp owns 61.6% of REA which equates to a stake worth around $3.5 billion. Given News Corp has a market capitalisation of around $11 billion this is a very significant asset.
Stripping out the REA stake and cash, investors appear to be currently able to buy the remainder of the News Corp businesses which include Dow Jones, the New York Post and HarperCollins on an enterprise value to EBITDA multiple of 7. While this may not be a screaming bargain, shareholders will know that Rupert Murdoch has plenty of reasons to make sure this stand-alone business succeeds. Compared with a purchase of REA on a PE multiple of nearly 40, the better trade could be to back the savvy media mogul Murdoch, while at the same time hitching a ride on the future growth of the high quality REA business.
