Investors tend to focus on the negatives of the media sector, such as declining print publishing and free to air television. But there are plenty of growth stocks out there too which can be bought at bargain prices.
The first is WPP Aunz Ltd (ASX: WPP). This is the dominant media communications advisory group in the sector, formed by the merger of global leader WPP with STW Communications. It consists of more than 90 businesses, advising the likes of Westpac and Vodafone. Because it is 60% owned by WPP, this stock is easily overlooked by Australian institutions, but for the private investor it’s a steal on just 9x earnings and a fully franked 7% yield.
The next is HT&E Ltd (ASX: HT1), which stands for Here, There and Everywhere. Investors will remember it better as the old APN News & Media. It owns several trophy media assets, such as the leading outdoor advertiser Adshel, and radio stations such as KIIS and Gold.
Radio and outdoor advertising are two of the success stories of “old” media. The share price is currently depressed due to the loss of a large Adshel contract, but I’d be surprised if this can’t be replaced. On 15x earnings, the shares are not as cheap as WPP, but you’re getting some quality assets for the price.
Enero Group Ltd (ASX: EGG) is a much smaller version of WPP Aunz. However, it provides exposure to the USA and UK too, which are now almost 60% of group revenues. Despite re-organisation costs and the uncertainty of Brexit, which led to a reduction in after tax profits in 2017 to $4.9m, free cashflow was a healthy 7.7m. I expect a decent rebound in profits this year, especially in the USA, where the group’s technology specialist Hotwire has been boosted by the acquisition of another tech player Eastwick Communications.
Finally, a “hidden gem”. Aspermont Limited (ASX: ASP) is the leading information portal for the mining sector. It owns flagship publications such as Mining Journal. The group has successfully transitioned from print to digital media. Aspermont’s subscription metrics are very strong, and advertising revenues are picking up now that the sector is in much better health. There is growth yet to come from Events, and expansion into Agriculture. Tightly held, Aspermont is capitalised at just $18m.
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Motley Fool contributor James Middleweek owns shares in Aspermont. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.