In a research note sent to clients this week, the team at Macquarie have named their top pick in the media sector.

Even the companies Macquarie has a neutral rating on are changing hands below its price targets, meaning double-digit gains might still be on the table.

Ad spend weak in October

Macquarie said the Standard Media Index – a measure of Australian ad agency spending – showed that spending for October fell 15% compared to the same month last year, and across the first half of the year to date, spending was down 7%.

Spending in the out of home sector was down 6% for October, while free-to-air TV spending was 16% lower for the month.

Macquarie said further:

The ad market does not look to have seen the expected stabilisation during the December quarter, which generally makes up 27% of volumes. There is however some optimism into early-2026 for improvement, but without clear catalysts, noting: 1) Australia likely moving to a rate hike cycle and 2) booking visibility still short.

Macquarie said that media stocks generally underperformed when rates were rising, but it did name one company it expected to outperform, in oOh!media Ltd (ASX: OML).

For Nine Entertainment Co (ASX: NEC) and Seven West Media Ltd (ASX: SWM), the broker's research team said they remained cautious with regard to free-to-air television advertising spending, "and the need to constantly manage costs to support earnings''.

Revenue set to increase

Positives for oOh!media included an increase in out of home spending of 9% year to date, despite the weakness in October.

Macquarie is predicting 6% year-on-year revenue growth for the company, "supported by positive 1Q26 feedback, although visibility is low, and an Australian rate hike cycle may impact growth''.

The Macquarie team have a price target of $1.45 on oOh!media shares, compared with $1.29 at the close on Tuesday.

With regard to Nine and Seven, Macquarie points out that the FTA TV market has been in structural decline for the past 10-plus years.

Looking at the fourth quarter of 2025, the expected stabilisation of total TV revenues (FTA + broadcast video on demand growth) across the industry does not seem likely as FTA declines (over 80% of volumes) continue to more than offset BVOD. During October 2025, we estimate that total volumes were down 9%-11% and November / December also looks challenging, with Nine recently commenting that 'the total TV market remains soft and very short for the run into Christmas'.

Macquarie said for both Nine and Seven, "further cost initiatives will be paramount to protecting profitability''.

Despite not being bullish on the advertising market, Macquarie's price targets for both shares are above current trading levels, with a target of $1.25 for Nine, against a price of $1.11 on Wednesday, and a price target of 16 cents for Seven, compared with 13.5 cents.

Seven is also currently undergoing a process to merge with Southern Cross Media Group Ltd (ASX: SXL), with the deal announced in late September.

The post Which three media companies could deliver double-digit returns? appeared first on The Motley Fool Australia.

Southern Cross and Seven West announced plans to merge in late September, with Seven West Media shareholders to receive 0.1552 Southern Cross shares for each share they own under the deal.

Strength in scale

The merger would create a diversified media group, bringing together Southern Cross' radio networks, including Triple M and the Hit network, with Seven West's television networks, as well as The West Australian newspaper and the free online publication The Nightly.

The two companies stated at the time that the merger, which would create a company valued at approximately $400 million, would yield annual cost savings of around $25 million to $30 million, alongside annual revenue of approximately $1.8 billion.

Following the implementation of the merger, Southern Cross shareholders would own 50.1% of the merged entity, with Seven shareholders owning the rest.

Both companies have commissioned independent expert's reports into the proposed merger, with Southern Cross releasing its report to the ASX this morning.

The report's authors, Kroll, said the deal, which does not require a shareholder vote from Southern Cross shareholders, was positive for them.

As they said in their report:

In our opinion, we consider the scheme is in the best interests of Southern Cross shareholders in the absence of a superior proposal. Our analysis of the underlying equity value contributed by Southern Cross shareholders compared to the underlying equity value of the combined group (inclusive of synergies) that they will receive indicates that Southern Cross Shareholders should benefit from an increase in the underlying value of their shares.

Multiple merger benefits

The report said the proposed merger would bring together two complementary businesses, and their combination, "will result in an integrated multi-media platform which is expected to have strong reach across the Australian advertising market''.

The report stated that the merger offered several strategic benefits, including the ability to leverage audience crossover to enhance user experience and provide advertisers with better analytics and targeted marketing.

The increased size of the group would also enable it to withstand the challenging structural changes affecting the media sector, the report said, "with the combined group's greater diversification and size (providing) an enhanced ability to withstand structural shifts in the advertising market and mitigate the impact of cyclical downturns in any single market''.

Other potential benefits included improved negotiating power with suppliers and improved offerings to advertisers through its greater national presence and brand strength, the report said.

The report also said the merger ratio, that is, the number of shares being offered to Seven West shareholders, was also considered fair.

The merger requires the approval of Seven West shareholders only.

The post Southern Cross and Seven West merger gets the tick from independent expert appeared first on The Motley Fool Australia.

In a statement to the ASX on Thursday, Southern Cross said its underlying EBITDA for the first quarter of FY26 would come in at $14 million, up 129% on the same period last year.

Total audio revenue of $105.1 million was up 4.7% year on year, and the company's share of the nation's metropolitan radio markets came in at 29.8%, up 1.8 points.

The company had now delivered 12 consecutive months of market share improvements, it said.

Business travelling well

Southern Cross Chief Executive Officer John Kelly said the company was performing well:

Southern Cross's positive operating momentum continues into FY26 with our focus on growing and monetizing the audience that matters. We have seen continued improvement in revenue share across both broadcast and digital as our sales teams outperform the broader market.

Mr Kelly said the company was also focused on disciplined cost management, with costs falling 3.4% on the prior period.

The company also reaffirmed its full-year EBITDA guidance of $78 to $83 million.

Takeover details soon to come

Southern Cross also updated the market on its proposed merger with Seven West, saying an independent expert's report had been commissioned and would be released to the market in November.

Southern Cross and Seven West announced the proposed merger, which would create an integrated media company worth more than $400 million, in late September.

Under the proposed merger, Seven West Media shareholders will receive 0.1552 Southern Cross shares for each share they own.  

Seven West's key brands are the suite of Seven television channels, as well as newspaper, The West Australian, and free online publication, The Nightly.

Southern Cross' key brands are the Triple M radio network, the Hit network, and the audio streaming service, Listnr.

Opposition to the merger soon arose, however, with Southern Cross receiving a notice under Section 249D of the Corporations Act from Sandon Capital, looking to requisition a shareholder meeting.

That meeting would be held to propose a resolution which would restrict Southern Cross's ability to issue new shares, and hence, as Southern Cross said at the time, "would be inconsistent with the proposed merger''.

Southern Cross said in an announcement to the ASX earlier this month that based on the support it had already received from major shareholders, it was apparent the resolution would not pass.

Southern Cross shares were 3.3% higher on Thursday morning at 85.2 cents.

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Southern Cross told the ASX on Wednesday that late on Tuesday, it received a notice under Section 249D of the Corporations Act from Sandon Capital, looking to requisition a shareholder meeting.

As Southern Cross explained:

The notice was executed by the registered holders of more than 5% of Southern Cross' ordinary shares — One Fund Services Limited and One Managed Investment Funds Limited — requiring that the directors of Southern Cross call and arrange a general meeting to consider the attached shareholder resolution.

The resolution, Southern Cross said, proposes to amend the company's constitution with regard to its ability to issue shares.

The amendment proposed by the resolution would restrict the ability of Southern Cross to issue more than 25% of its shares without shareholder approval. Southern Cross notes that if the amendment were made it would be inconsistent with the proposed merger announced yesterday with Seven West Media.

Southern Cross shares fell more than 7% to 83 cents on the news, while Seven West shares were steady at 15 cents.

Resolution won't pass, Southern Cross says

Southern Cross said on Wednesday that the resolution requested by Sandon Capital was likely doomed to failure, given that two of its own shareholders had indicated they would vote against the resolution, which would need more than 75% support to pass.

Southern Cross advises that shareholders collectively representing more than 25% of its shares, being Thorney Investment Group (15%) and Spheria Asset Management (14%) have advised that they are not supportive of this form of resolution and intend to vote against it. Based on this statement of intention, the resolution would not be passed, and the board and management will focus their efforts on the implementation of the proposed merger which the board has determined to be in the best interests of all Southern Cross shareholders and delivery of the synergies and value accretion expected from that merger for Southern Cross shareholders.

Southern Cross and Seven announced the proposed merger, which would create a media company with assets across television, newspapers and online news outlets, radio, and podcasts, on Tuesday.

The deal was expected to generate $25 to $30 million worth of cost savings across the merged group.

Both companies have struggled to generate substantial profits in recent years, with the market value of each plummeting over the past decade, from valuations in the billions to just north of $200 million for each company now.

The boards of both companies support the merger proposal, and SGH Ltd (ASX: SGH), the company formerly known as Seven Group Holdings, has indicated it will vote its 40.2% stake in Seven West Media in favour of the deal.

The post Media company shares on the slide after merger opposition emerges appeared first on The Motley Fool Australia.

Under the proposed merger, Seven West Media shareholders will receive 0.1552 Southern Cross shares for each share they own.  

Seven West is currently valued at $215.5 million, while Southern Cross is valued at $201.5 million.

Seven West's key brands are the suite of Seven television channels, as well as newspaper, The West Australian, and free online publication, The Nightly.

Southern Cross' key brands are the Triple M radio network, the Hit network, and the audio streaming service, Listnr.

Media stocks struggling

Media companies have struggled to remain profitable in the digital age, evidenced by the plunge in the value of Seven West shares over the past two decades.

Back in 2007, the company's shares were valued at more than $15, with Seven valued in the billions at the time.

The stock has been on a relentless march lower over the past decade, however, and now changes hands for just 14 cents.

The company has not paid a dividend since 2017, and made just $17 million in net profits last year on revenue of $1.35 billion.

Southern Cross Media shares have followed a similar trajectory, changing hands for more than $36 back in 2007, and just 84 cents now.

The radio company made a modest net profit of $9.2 million last financial year on revenue of $421.9 million, after posting a $224.6 million net loss the year before.

Southern Cross has been paying dividends, however.

Larger, stronger business to emerge

Southern Cross chair Heith Mackay-Cruise said the merger would create a leading, integrated television, audio, and digital platform.

The combination of Southern Cross' and Seven West Media's leading brands on broadcast and digital platforms establishes an indisputable leader across the critical 25-54 'audience that matters' demographic. The merged entity will offer partners and clients a 'one stop shop' for opportunities to reach this valuable audience across all mediums, leveraging shared content and commercial opportunities to add value beyond the initial cost synergy estimates.   

The boards of both companies support the merger proposal, and SGH Ltd (ASX: SGH), the company formerly known as Seven Group Holdings, has indicated it will vote its 40.2% stake in Seven West Media in favour of the deal.

The companies said work had already been done on assessing the cost benefits of merging the businesses.

Southern Cross and Seven West's joint preliminary synergy assessment has identified annual pre-tax cost synergies of $25-30 million, to be realised within 18-24 months post completion. These synergies comprise the reduction of shared corporate overhead, operating expense duplication and facility consolidation. Further work continues to maximise potential revenue synergies and to structure an integration plan to bring the best of both companies together to maximise value for shareholders.

Seven West Managing Director Jeff Howard will lead the new business if the merger goes through.

Seven West shareholders will need to approve the deal, with at least 75% of votes cast and more than 50% of shareholders present at a meeting required to get the deal over the line.

The post Seven West Media and Southern Cross Media announce $400 million-plus merger appeared first on The Motley Fool Australia.

A recent report into the media sector rates oOh media as outperform, while the more diversified Nine Entertainment Co. Holdings Limited (ASX: NEC) and Seven West Media Limited (ASX: SWM) attracted a neutral rating.

The Standard Media Index, a measure of Australian agency ad spend, showed that July spend fell 12% year on year, which brings 2025 year to date to +1% year on year, and the past three-months down 5% year on year. For context, ASX listed media companies have talked to a slow 3Q25, but with suggestions that trends improve sequentially in 4Q25.

In contrast to the broader market, the out of home sector where oOhmedia "continues to outperform other categories" is up 11% so far this calendar year, Macquarie analysts said.

July 2025 out-of-home ad spend dropped 8% YoY (2025 YTD growth = +11%); however, given month-to-month volatility the trailing three-month average is a better measure in our view and is +4% YoY – this compares to the total ad market which has dropped 5% in the same period.

The broker has a target price of $2 on oOh Media compared with the current price of $1.67. It expects Seven West Media shares to appreciate marginally to 16 cents from 14 cents. In contrast, the broker expects Nine Entertainment Co. shares to fall sharply to $1.25 from $1.75.

Macquarie says it remains positive around advertising spending overall, with industry feedback suggesting a strong finish to the calendar year, particularly given the likelihood of another official interest rate cut in November bolstering consumer spending.

We continue to see the out-of-home category as a structural winner, with ongoing challenges within free-to-air TV, radio and print, and of which supports oOh!media as our top pick within traditional media. Importantly, out-of-home trends are expected to improve in 4Q25 (albeit with low visibility) with agency feedback talking to improvements and with rate cuts expected to support improved consumer sentiment/spending.

Macquarie said Nine Entertainment Co. and Seven West Media were both at risk from the structural decline of the print sector and the uncertainty around macroeconomic conditions more generally.

The broker said both also faced risks from potential wins and losses in sporting rights and other content in a competitive market.

The post Can you guess Macquarie's top pick in the ASX media sector? appeared first on The Motley Fool Australia.

Three ASX media shares that are charging higher today are listed below. Let's see why investors are scrambling to buy them:

Seven West Media Ltd (ASX: SWM)

The Seven West Media share price is up 9% to 18 cents. This follows the release of the media company's half year results, which appear to have been better than feared.

Seven West Media reported a 6% decline in revenue to $727 million and a 26% decline in EBITDA to $92 million. This was driven largely by a 6% fall in total TV advertising revenue due to ongoing soft market conditions and the impact of major sporting events. The latter includes the FIFA Women's World Cup taking place in the prior corresponding period and the Olympics being on a rival station during the reporting period.

However, it is worth noting that this didn't stop Seven from increasing its total TV revenue share to 41.5% (+0.5 points), which is a record share for a non-Olympic broadcaster.

The ASX media share's managing director and CEO, Jeff Howard, said:

Seven West Media's H1 FY25 results reflect the ongoing soft total TV advertising market and the impact of major one-off sporting events. Mitigating the full impact of these revenue headwinds was an increase in our total TV revenue share to 41.5% (up 0.5 points) and the benefits of our year-on-year operating cost savings initiates.

No dividend was declared for the half. Its shares are down over 35% since this time last year.

SGH Ltd (ASX: SGH)

The SGH share price is up 6% to $51.67. As we covered here earlier, this morning this diversified company, better known as Seven Group Holdings, released its half year results.

The company reported a 2% increase in revenue to $5.5 billion and a 10% lift in EBIT to $843 million for the half. This was despite its media segment reporting an 18% decline in EBIT to $23 million for the period.

In light of its strong group profit growth, the SGH board decided to increase its fully franked interim dividend by 30% to 30 cents per share.

Nine Entertainment Co Holdings Ltd (ASX: NEC)

The Nine Entertainment share price is up over 10% to $1.42. This is despite the ASX media share not releasing its results today. These results are expected to be unveiled in a couple of weeks on 25 February.

However, investors appear to have gained enough knowledge from Seven West Media's results to predict that Nine Entertainment is likely to deliver a better than forecast result later this month. As a result, they have been picking up its beaten down shares this morning.

Nine Entertainment shares remain down 25% over the past 12 months.

The post 3 ASX media shares going gangbusters today appeared first on The Motley Fool Australia.

Shares in the All Ordinaries Index (ASX: XAO) multimedia company closed yesterday trading for 15.5 cents. As we head into the Wednesday lunch hour, shares are changing hands for 16.5 cents apiece, up 6.5%.

For some context, the All Ords is up 0.9% at this same time.

Today's outperformance follows the release of Seven West's full-year 2024 financial results for the 12 months ending 30 June (FY 2024).

Here are the highlights.

Seven West Media share price leaps despite falling profits

• Revenue of $1.42 billion, down 5% on FY 2023
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) before significant items of $187 million, down 33% year on year
• Underlying net profit after tax (NPAT) after excluding significant items of $78 million, down 46%
• Costs of $1.23 million, up 2% from last year
• Net cash flow before temporary and capital items of $54 million, down 65%

What else happened during the year?

Judging by the above metrics and today's strong lift in the Seven West Media share price, the market had clearly priced in a difficult year for the company, which sees it exceeding expectations today.

On the plus side of the ledger, Seven West Media reports a 0.5% year-on-year increase in its total linear audiences. And digital minutes were up 39% from last year.

And while full-year costs were up 2%, costs in the second half of the financial year (H2 FY 2024) were 4% lower than the prior corresponding half-year.

The fall in the company's total TV market also showed some improvement in the second half. That declined 8.2% over the full year, but this fall moderated to 7.2% in the second half, an improvement from the 9.1% decline reported in the first half.

Seven West Media also noted its total TV revenue share increased by 1.7% over the year to 40.2%. This partially offset its market decline, with share growth achieved in every quarter.

On the balance books, the company's net debt increased to $301 million, driven by its ARN investment. Taking the ARN investment out of the picture, net debt fell by $15 million year over year.

What did management say?

Commenting on the results sending the Seven West Media share price flying higher today, CEO Jeff Howard admitted FY 2024 was "a tough result for SWM in a challenging market".

Howard added:

While growth in audience and revenue share partially offset the impact of the weak market, cost growth of 2% contributed to our EBITDA decline of 33%, reflecting the operating leverage in our business.

Following delivery of $25 million of cost out initiatives in 2H, we have taken decisive action to materially increase the program into FY25 to give SWM a platform to drive improved performance…

SWM continues to deliver market leading content across our linear and digital platforms that engaged and grew audiences during FY24. We achieved solid growth in our BVOD audience during the year, but we are still to fully capture the revenue opportunity.

What's next?

Looking at what might impact the Seven West Media share price in the year ahead, Howard said, "We are committed to driving improved profit and cash flow irrespective of market conditions."

He added:

Despite the advertising environment, we are focusing on capturing a greater proportion of available dollars in each market including a step change in our digital revenue performance. FY 2025 revenue will include the benefit of digital rights under the new cricket and AFL sport contracts.

We have also implemented an enhanced cost out program that will deliver a year-on-year decline in costs in FY 2025.

Seven West Media said it expected to achieve revenue share gains in FY 2025 from digital sports rights from November onwards.

Full-year costs are forecast to be $20 million to $30 million lower than in FY 2024.

Seven West Media share price snapshot

Despite today's welcome gains, the Seven West Media share price remains down 59% over 12 months.

The post The Seven West Media share price just jumped 7%. Here's why appeared first on The Motley Fool Australia.

Cases in point today: Seven West Media Ltd (ASX: SWM) and James Hardie Industries plc (ASX: JHX).

The Seven West Media share price is currently down a whopping 10.91% at 24.5 cents after the group released its 1H FY24 earnings.

Building materials supplier James Hardie is also down, with the share price 5.41% lower at $55.99. The company released its 3Q FY23 update today.

Let's find out why these ASX All Ords stocks are taking a tumble.

What's killing this ASX All Ords media player?

Seven West Media said it was successfully executing its plan to grow audience and revenue share, however, weaker advertising sales in 1H FY24 led to a 40% collapse in its earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $124 million.

The ASX All Ords media company reported group revenue of $775 million, down 5% on the previous corresponding period (pcp).

Underlying net profit after tax (NPAT) (excluding significant items) came in at $63 million, down 49% pcp.

SWM CEO James Warburton said:

SWM successfully executed on our strategy during the period to deliver consistent and engaging content to drive audience growth and revenue share across the total TV market.

Despite this progress and our disciplined management of costs, our financial performance reflects the weakness in advertising markets, particularly as the second quarter progressed.

We continue to believe in the power of television and firmly believe that the total TV industry is set to regain market share. Total TV is now growing, and Seven is leading that growth.

The ASX All Ords media stock has fallen 45.6% over the past 12 months.

Investors hit the sell button on ASX All Ords building stock

ASX All Ords building materials supplier, James Hardie has also disappointed investors today.

This is despite the company reporting growth in the third quarter of FY23 on all financial metrics.

The company reported global net sales of US$978.3 million in 3Q FY24, up 14% on the pcp of 3Q FY23.

Adjusted EBITDA came in at US$280.4 million, up 34%. The adjusted EBITDA margin was 28.7%, up 4.4%.

James Hardie CEO Aaron Erter said the company had delivered four strong consecutive quarters demonstrating rising market share.

We have a superior value proposition that helps our customers grow and be successful.

Our team is focused on maintaining this momentum and consistency to deliver strong financial results again in the fourth quarter.

The ASX All Ords building materials stock has lifted 76.7% over the past 12 months.

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The All Ordinaries Index (ASX: XAO) is following US markets lower on Wednesday, down 1.34% in afternoon trade.

But these three ASX All Ords stocks are faring far worse following earnings results that have clearly disappointed investors.

Let's have a look.

Why are these 3 ASX All Ords shares tumbling today?

The first ASX All Ords share that's taking a dive on Wednesday is Fletcher Building Ltd (ASX: FBU).

At the time of writing, shares in the New Zealand-based building and materials company are down 6.9%, trading for $4.72 apiece.

Fletcher Building reported strong FY23 revenue of $8.5 billion, roughly in line with FY22.

But investors may be disappointed in the slide in net profit after tax (NPAT), which fell to $235 million, down from $432 million in FY22.

Fletcher Building CEO Ross Taylor said FY23 NPAT was "impacted by significant items charges of $301 million".

Taylor noted, "The significant items related mainly to additional provisions of $255 million on the New Zealand International Convention Centre and Hobson Street Hotel project."

Which brings us to the second ASX All Ords share that's underwhelming investor expectations today following its FY23 results, Seven West Media Ltd (ASX: SWM).

Shares in the multimedia company are currently trading for 38 cents apiece, down 5%.

Seven West reported it had achieved "solid performance in a challenging environment".

Despite that solid performance, the Seven West share price looks to be under selling pressure following a 7.9% decline in the total TV advertising market in FY23.

Investors also appear to be hitting the sell button after the ASX All Ords share reported an 18% year on year drop in earnings before interest, taxes, depreciation and amortisation (EBITDA), which came in at $280 million.

Net cash flow before temporary and capital items of $155 million was down 19% on FY22.

Rounding off the list of ASX All Ords companies doing it tough today after reporting FY23 results is Dexus (ASX: DXS).

Shares in the Aussie property developer and manager were down almost 10% in early trade but have since regained much of that ground. At the time of writing the Dexus share price is $7.795, down 2.68%.

Much of that selling pressure facing the ASX All Ords share today is likely linked to the FY23 statutory net loss after tax of $753 million. That's a far cry from the statutory net profit after tax of $1.62 billion reported in FY22.

Dexus said the FY23 losses were "primarily driven by unrealised fair valuation losses on investment property in FY23 compared to gains in FY22".

The post 3 ASX All Ords shares diving on disappointing results appeared first on The Motley Fool Australia.

Unfortunately, all too often, this leads to investors scooping up companies that are trading on low price-to-earnings (P/E) ratios, convinced they're making a great investment. What can ensue in the following years is a company that sheds its sheepish clothing to reveal a wealth-eating wolf.

The humble P/E ratio can be a handy tool on the investing toolbelt, but it shouldn't be the only one.

Cheap doesn't always mean value

Legendary stockpicker Warren Buffett has said before, "Price is what you pay, value is what you get." In all its simplicity, it can be easy to misunderstand what is really being conveyed in this statement.

The point is the price is secondary. It's impossible to know whether you're getting a good deal until knowing what it is you are getting for the price. Only then can an informed decision be made on whether an investment might present good value for money.

What makes it even trickier is that future value can be different to historical value.

For example, imagine you're looking for a set of sheets. A set of Egyptian cotton sheets have been selling for $150 for the past year. Suddenly, the store calls you up, "Hey, we're taking orders for next year… $75 and they're yours. The only catch is there's a good chance they end up being polyester."

You think to yourself… I can go buy standard polyester sheets for $20. Why would I pay $75? If they turn out to be polyester, that's not really good value for my money.

Essentially, a lot of 'cheap' ASX shares can turn out to be $75 polyester sheets.

My favourite personal example of this is Vita Group Limited (ASX: VTG). Early into my investing journey, I came across this company that looked dependable — leasing out stores to Telstra Group Ltd (ASX: TLS) — safe as houses, I thought.

At the time, Vita Group was trading on a trailing P/E of around 6 times earnings. I was sold. How could an ASX share be so cheap?

Well, it turns out Vita wasn't so dependable. After Telstra bought back its stores, Vita wasn't left with much of a business.

Despite never trading for more than 11 times earnings between 2018 and 2020, the company's shares gradually became worth less and less.

From 'cheap' at $1.50, to not wanting to touch it at 15 cents.

Which ASX shares are suspiciously cheap?

Flicking through a list of Aussie companies currently available for earnings multiples under 10, there are five that raise some concerns.

• Seven West Media Ltd (ASX: SWM) — 3.1 times earnings
• Rural Funds Group (ASX: RFF) — 2.9 times earnings
• Elders Ltd (ASX: ELD) — 7.8 times earnings
• Magellan Financial Group Ltd (ASX: MFG) — 7.2 times earnings
• Autosports Group Ltd (ASX: ASG) — 6.2 times earnings

Firstly, in my opinion, Seven West faces challenges with declining revenue from traditional media and increasing competition from Netflix Inc (NASDAQ: NFLX) and Walt Disney Co (NYSE: DIS) with the introduction of ad-supported tiers.

Furthermore, Rural Funds and Autosports could see their earnings reduce in coming years as profits normalise. Autosports has enjoyed above-average margins amid car supply shortages. Whereas Rural Funds has booked large profits from one-off gains in the past year.

Lastly, both Elders and Magellan are facing their own set of challenges. The Aussie agribusiness could see greater deterioration in business conditions if a drought grips the country. Meanwhile, Magellan is still trying to stem the outflows from its managed funds.

All of this is to say, it's worth taking a deeper look into a company before labelling it as a cheap ASX share. The abovementioned businesses might still represent value, but if they do, it won't be evident from the P/E ratio alone.

The post 5 ASX shares with tiny P/E ratios (and why they're not as cheap as they look) appeared first on The Motley Fool Australia.

With consumers and businesses starting to reel from nine months of interest rate rises, all eyes will be on whether ASX companies can survive the downturn in one piece.

The team at Wilsons is upbeat.

"We believe the reporting season will be relatively positive," equity strategist Rob Crookston said in a memo to clients.

"The cyclical sectors may provide more positive results than the market expects after continued strength in the global and domestic economies in the last half."

However, investors will need to be selective about the ASX shares they buy, with every word of outlook statements pored over.

Fortunately, Crookston's team has done the hard yards to come up with four stocks that they believe have the best prospects heading into their February updates:

Advertising businesses could surprise 

Late on Wednesday, Nine Entertainment Co Holdings Ltd (ASX: NEC) announced it had grabbed the Olympics off incumbent Seven West Media Ltd (ASX: SWM).

The $315 million agreement gives Nine the broadcast and digital rights for the next five games, consisting of three summer and two winter events.

Nine, due to report on 23 February, is one of Wilsons' picks.

"We may see upgrades in the sector over reporting season as higher-than-expected consumer spend corresponds to higher-than-expected ad spend," said Crookston.

"Nine should be a key beneficiary of this opportunity, especially as the stock derated over 2022 and currently sits on a relatively modest PE of ~11x."

Jobs classified site Seek Ltd (ASX: SEK) has stunningly rallied 23.5% year-to-date, but Crookston reckons "there is still room" for its 21 February report to positively surprise.

"We expect a strong showing from Seek as it benefits from a resilient jobs market."

The Wilsons team is looking for a confirmation of its previously stated full-year guidance and "continued strength in the ANZ labour market". 

"A strong interim result could lead to consensus earnings upgrades for FY23/FY24," said Crookston.

"We also like the structural story for Seek — significant upside from dynamic pricing model, strategic initiatives and growth fund — that should mitigate any fallout in a cyclical peak in the job market."

'Start of an earnings upgrade cycle'

After years of underperformance, the share price for biotech giant CSL Limited (ASX: CSL) is finally starting to approach its pre-COVID highs.

The post-pandemic era could not come fast enough for healthcare stocks, according to Crookston.

"We expect CSL's earnings recovery to be a beat, driven by better-than-expected plasma collections," he said.

"This, coupled with new product approvals, could lead to a possible guidance upgrade."

The signs point to a potential "start of an earnings upgrade cycle for CSL", he added, revealing that his team is overweight on the stock.

CSL will report Tuesday.

The Qantas Airways Limited (ASX: QAN) share price is up 50% since June, but Wilsons reckons the party will continue into its 23 February results announcement. 

"Qantas is set for a bumper earnings season. After being forced to postpone travel plans due to the pandemic, consumers are shrugging off 15-year high ticket prices," said Crookston.

"The business has the capacity to surprise the market positively, and we do not think the valuation is pricing a further upgrade."

Wilsons analysts suspect China's post-COVID reopening could give the airline another tailwind to take off on.

"We think the market underestimates the recovery in Chinese tourists as it did for domestic travel over the last 12 months. This could be discussed in trading updates of travel or international education stocks."

The post 4 top ASX 200 shares to pounce on for reporting season: Wilsons appeared first on The Motley Fool Australia.

Four ASX shares that are not letting that hold them back today are listed below. Here's why they are rising:

HT&E Ltd (ASX: HT1)

The HT&E share price is up over 3% to 99.7 cents. This morning the advertising and media company announced the sale of its ~25% interest in Soprano Design to Potentia Capital for $66.3 million. Management believes the all-cash deal will allow the company to focus on its position as a leading provider of audio services in Australia.

Seven West Media Ltd (ASX: SWM)

The Seven West Media share price is up 2.5% to 40.5 cents. This follows news that the company has signed a new agreement with Cricket Australia. The seven-year deal extends the company's media rights from the 2024-25 season to the 2030-31 season. Seven West Media will be paying $65 million a year, which is a 13% reduction on its previous deal.

Tabcorp Holdings Limited (ASX: TAH)

The Tabcorp share price is up 2% to $1.10. This is despite there being no news out of the gambling company. However, given its relatively defensive earnings, investors may see it as a safe haven during the current market volatility.

Weebit Nano Ltd (ASX: WBT)

The Weebit Nano share price is up 6% to $3.45. This morning, the semiconductor company announced that it has released its first 22-nanometre demonstration chip to manufacturing. Weebit Nano's demo chip aims to provide a low-power, cost-effective embedded non-volatile memory solution able to withstand harsh environments.

The post Why HT&E, Seven West Media, Tabcorp, and Weebit Nano shares are rising appeared first on The Motley Fool Australia.

Shares in the ASX-listed media company are up 3.8% in morning trade at 41 cents per share.

This comes despite the broader market facing some headwinds today, with the All Ordinaries Index (ASX: XAO) down 1.0% at this same time.

So, why is the Seven West Media share price defying the sell-off?

What's piquing ASX investor interest?

The Seven West Media share price looks to be getting a boost after the company announced a new agreement with Cricket Australia.

The new, seven-year deal extends Seven West's media rights from the 2024-25 season to the 2030-31 season.

The company said that its 7plus channel will become the "live and free home of cricket", providing a digital package of rights atop the broadcast on its Seven Network. Seven West Media has never held digital rights to cricket before this agreement.

Commencing in 2024, Seven West Media will see a 13% decrease in its media rights fees from its current agreement. The new agreement will see the media company pay $65 million in cricket media rights fees a year. SWM said that it has achieved cash savings from rights reduction and production savings of more than $50 million over the term compared to the existing rights deal.

Cricket Australia has said it will reduce the number of Big Bash League (BBL) games to create a shorter tournament that will run for five to six weeks.

Seven West and Cricket Australia had been involved in a legal stoush over prior contract issues. With the new agreement in place, both sides have agreed to drop the court proceedings, with each paying its own costs.

Commenting on the agreement that looks to be sending the Seven West Media share price higher today, CEO James Warburton, said:

We are delighted to extend our partnership with Cricket Australia until 2030-31. A comprehensive package of digital rights to the cricket for 7plus will ensure that for the first time, our viewers will be able to access cricket, live and free, in a way that suits them.

Our combined broadcast and digital rights for both cricket and the AFL means Seven and 7plus will be the home of sport all year round… We look forward to working with Cricket Australia to grow Test cricket, women's internationals and the BBL and WBBL in the years ahead.

Seven West Media share price snapshot

As you can see in the below chart, the Seven West Media share price came under pressure in 2022, falling almost 35%. With that year behind us, we imagine investors will be cheering a positive start to the new year.

The post Seven West Media share price lifts off on new cricket announcement appeared first on The Motley Fool Australia.

Since inception in October 2009, the Forager Australian Shares Fund (ASX: FOR) has handily out-performed its benchmark, gaining 9.25% per annum versus 7.79% for the All Ordinaries Total Accumulation Index (ASX: XAOA).

In its August 2022 monthly update, the fund says that although most of corporate Australia is on high alert – with expectations high inflation, higher interest rates and falling house prices must eventually curtail consumer spending – there is no sign of a consumer strike just yet.

"While there is a justifiably high level of concern, record low unemployment, increasing wages and high levels of savings from the past few years are allowing Australian consumers to keep spending."

"We are not expecting that to continue but the amount of pessimism baked into share prices back in June provided shareholders with a lot of room for profits to fall."

The fund goes on to call out two ASX shares that are susceptible to an economic slowdown, yet which still trade at very attractive prices.

Forager notes motorcycle and accessories retailer MotorCycle Holdings Ltd (ASX: MTO) is exposed to the most discretionary part of consumer spending, with its most profitable business being the sales of Ducati and Harley-Davidson motorbikes, typically optional purchases.

The fund says that although the MotorCycle Holdings share price is up more than 30% from its June lows, the roughly six times profit multiple it trades at today, and 8% fully-franked dividend yield, should prove attractive for long-term investors.

While share prices in the advertising sector were "absolutely walloped" in anticipation of a slowdown in economic activity, Forager notes the recent earnings season hasn't shown much evidence of a slowdown, with industry data suggesting August and September will be strong.

Forager says that although the Seven West Media Ltd (ASX: SWM) share price has risen over 50% from its June lows, the shares are trading at around four times last year's profits, "a level you would normally associate with a Russian telecommunications company".

The post Leading value fund Forager names two ASX shares trading at dirt cheap prices appeared first on The Motley Fool Australia.

Some of the ASX shares that are most impacted by a slowdown in spending is anything related to advertising.

The logic is that marketing spend is one of the first to be trimmed when businesses try to tighten their belts through tougher times. Promotion of goods and services is less effective anyway when consumers have less money to spend.

Because of this perception, most ad-related ASX shares have plunged in recent weeks.

However, Forager Funds portfolio manager Alex Shevelev and analyst Gaston Amoros reckon there are a couple of stocks that will fare better than the market expects.

The stock that's cheap as a Russian telco

In their reporting season review, the pair argued that August updates showed advertising hasn't actually slowed down that much, at least for some.

So some ASX shares are just selling at absurdly cheap levels at the moment.

"Seven West Media Ltd (ASX: SWM) is trading at around 4x consensus earnings, the level you would normally associate with a Russian telecommunications company, not one of the near-duopolistic owners of broadcast TV stations in Australia."

The Forager experts noted that Seven West is so bullish about advertising activity in the coming period that it backed up the rhetoric with actual cash.

"The company is so confident in its outlook that they have just announced a 10% buyback," they said. 

"And we tend to agree with them – buying its own stock at these levels seems like a very good deal."

Seven West shares have lost about a quarter of their value so far this year.

The rest of the professional community is divided on the media conglomerate. Out of the 12 analysts surveyed on CMC Markets, five rate it as a buy, four think it's a hold, and three recommend selling.

Bouncing back from COVID-19 but as cheap as 2020

Outdoor advertising provider oOh!Media Ltd (ASX: OML) is another example of a stock that's too cheap to ignore.

"Their business continues to bounce back strongly from the pandemic," said Shevelev and Amoros.

"While the core Street, Road and Retail segments have sustained the recovery thus far, Airports and Offices are still to make a comeback, providing more runway for growth into FY23."

Similar to Seven West, the oOh!Media share price has lost 22.4% year to date.

The Forage experts see this as a golden buying opportunity.

"Its share price… is back to the pre-vaccine days of 2020!"

Other fund managers share Shevelev and Amoros' enthusiasm for oOh!Media much more than Seven West.

According to CMC Markets, six out of nine analysts currently recommend the stock as a buy, with five of them rating it a strong buy.

The post 'A very good deal': Expert names 2 ASX shares to buy for CHEAP now appeared first on The Motley Fool Australia.

At market close, the media company's shares finished up 3.16% to 49 cents apiece after touching an intraday high of 51 cents a share.

Let's take a look in more detail at the company's latest announcement.

Seven West Media shares jump on bonanza AFL deal

Investors rallied up the Seven West Media share price today after the company announced a record AFL television rights deal.

According to The Australian, Seven advised it has signed Australia's biggest broadcast rights deal with the AFL.

This will see the Seven network, alongside Foxtel, retain television broadcast rights under a seven-year $3.85 billion contract.

In contrast, the AFL secured an extension of two seasons with Seven and Foxtel for $946 million during COVID-19.

However, one key detail that isn't clear is how much free-to-air televised footy will be shown.

The Seven network provides free access to a number of games over the week, while Foxtel is a pay-to-air service.

Seven West Media managing director and CEO James Warburton said:

We are delighted to extend our partnership with the AFL until 2031. Securing a comprehensive package of digital rights to the AFL for 7plus was our absolute focus. For the first time, fans will be able to access the best AFL games and video content, live and free, in a way that suits them.

More importantly, this new combination of broadcast and digital means SWM will be ideally positioned to drive and capture a significant share of the growing total television market.

Together, the AFL and Seven have made the code the #1 winter sport across the country and we look forward to working with the AFL Commission to extend the sport's leadership.

Seven West Media share price summary

After tumbling to a 52-week low of 33.5 cents during mid-May, the Seven West Media share price is staging a comeback.

The share fell almost 50% between May and June but has not looked back since. In that time, the company's shares are up 48%.

Seven West Media presides a market capitalisation of approximately $803 million.

The post Seven West share price lifts on new record AFL deal appeared first on The Motley Fool Australia.

As The Motley Fool Australia reported earlier, the media group posted a 60% increase in underlying after-tax profit – coming to around $201 million – for financial year 2022 and announced an on-market share buyback this morning.

At the time of writing, the Seven West share price is 48 cents, 5.77% lower than its previous close.

Let's take a closer look at today's news from the All Ordinaries Index (ASX: XAO) stock.

Seven West share price plunges on full year earnings

The Seven West share price is tumbling following the release of the company's full year earnings and news of an on-market buyback aiming to snap up 10% of its outstanding stock.

The company clocked a 21% improvement in revenue – lifting to $342 million – and a 35% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA), which came in above guidance at $1.5 billion.

On top of that, its operating costs amounted to nearly $1.2 billion, which was within its guided range, while its net debt deepened to $256.5 million.

Seven West managing director and CEO James Warburton celebrated the company's financial performance, saying:

These results represent the best Seven television EBITDA results in 11 years, the best EBITDA from West Australian Newspapers in five years, and our best group EBITDA result in six years.

Perhaps it's the company's outlook that's weighing on its stock on Tuesday.

Seven West expects its total TV advertising market to fall this quarter, mainly due to the impact of the Tokyo Olympic Games, broadcast on the company's free-to-air network last year.

It also predicts its share of total TV revenue will stay flat at 39% this financial year while its operating costs are tipped to come in slightly higher at between $1.2 billion and $1.22 billion.

Today's fall included, the Seven West share price is trading 22% lower than it was at the start of 2022. Though, it's still 2% higher than it was this time last year.

The post Seven West Media share price tumbles 5% on full-year earnings appeared first on The Motley Fool Australia.

The Seven West share price closed Monday's session at 52 cents.

Seven West share price on watch as profit lifts 60%

Highlights of Seven West's full-year results include:

• Underlying net profit after tax (NPAT) of $200.8 million – a 60% increase on that of the prior corresponding period (pcp)
• Revenue of $1.54 billion – a 21% improvement
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $342.2 million – a 35% improvement and ahead of guidance
• Earnings per share (EPS) came to 12.7 cents – up from 8.2 cents

The company's reach grew alongside key financial metrics over the year ended 25 June.

The company boasted a 39.1% share of the national television advertising market across financial year 2022.

Its metro TV revenue lifted 9%, while its regional TV revenue increased 6%. Additionally, West Australian Newspapers delivered its best result since financial year 2017 on the back of digital growth.

The company's operating costs also rose 17% to $1.198 billion – within its previously guided range despite rising inflation.

It also announced an on-market buyback of up to 10% of its shares on issue. The buyback will be conducted on an opportunistic basis over the coming 12 months and funded from existing debt facilities. It was born from improvements in the company's balance sheet over the past two years.

Seven West closed the financial year with a net debt level of $256.5 million – a 6.9% year-on-year increase.

What else happened in FY22?

The big news from the company last financial year was its acquisition of formerly ASX-listed Prime Media. The Seven West share price surged 14% when the acquisition was announced in November.

The Prime brand has since been retired and the company has today noted cost synergies will be at the top end of prior guidance.

Of course, the company was front of mind at the beginning of the financial year as Seven aired the 2022 Tokyo Olympic Games. The games were said to provide a launch pad for Seven's 2022 financial year content line-up, including The Voice, SAS Australia, Dancing With The Stars: All Stars, The Voice Generations, the AFL Finals Series, Bathurst 1000, the Ashes Cricket Test Series, and the Beijing Winter Olympics.

What did management say?

Seven West managing director and CEO James Warburton commented on the company's earnings, saying:

These results mark the strongest financial performance by our company in over a decade and reflect the successful completion of the group's three-year strategy.

[They] represent the best Seven television EBITDA results in 11 years, the best EBITDA from West Australian Newspapers in five years, and our best group EBITDA result in six years.

What's next?

Seven West has updated the market on its performance over the current quarter and its outlook for the rest of this financial year.

It noted trading conditions in the September quarter have been skewed by the impact of the Olympics. The company estimates its quarterly total TV advertising market is down around 2% excluding the Olympics and around 7% including the games. The December quarter, however, is expected to be positive year-on-year.

Seven West is targeting a 39% share in total TV revenue in financial year 2023. Seven Digital is forecast to grow its EBITDA this financial year. Meanwhile, its digital platform news revenue is expected to be consistent with financial year 2022.

The company's operating costs for the current financial year are expected to come in at between $1.2 billion and $1.22 billion.

Seven West share price snapshot

The Seven West share price has had a rough trot on the ASX lately.

It has slipped 17% since the start of 2022. Though, it's currently trading 8% higher than it was this time last year.

Meanwhile, the All Ordinaries Index (ASX: XAO) has dumped 8% year to date and 7% over the last 12 months.

The post Seven West Media share price in focus following best financial performance in a decade appeared first on The Motley Fool Australia.

The Seven West share price is on the move today amid the release of its investor presentation and trading update, presented at the Macquarie Australia Conference.

Seven West updates guidance

In its presentation, Seven West mentioned that it is on track to report FY22 EBITDA from its 7Digital segment to $130 million, based on internal guidance.

As such, it also updated full group projections "from the previous guidance of between $315 million and $325 million to between $335 million and $340 million."

Seven West CEO, James Warburton, noted the reasons for such a change:

The recent acquisition of Prime Media Group, coupled with the winning performance of the Seven broadcast television business and the strong growth of 7plus, make SWM the undisputed leader in the national total television market – a position that we plan to build on in the future.

The company also quoted Bloomberg consensus figures that show analysts expect it to report underlying net profit after tax (NPAT) of $178 million in FY22.

"The earnings upgrade reflects the strength of advertising markets and the ongoing success of Seven's broadcast and digital businesses," Warburton added.

Further to updating guidance, the group also recovered its FY21 revenue of $1.27 billion and group EBITDA of $254 million.

The bolus of both revenue and earnings came from its TV Broadcast segment, precisely where Seven West sees continued growth into the coming years.

Seven West Media share price snapshot

In the last 12 months the Seven West share price has held onto a 35% gain. However, since trading resumed in January, it has slipped less than 1% into the red.

That's after soaring to a new 52-week high of 80 cents back in February.

The post What's with the Seven West Media share price today? appeared first on The Motley Fool Australia.