Southern Cross Media (SXL)

By Jason Fittler

SXL is a media provider that owns and engages in the broadcasting of content on free to air commercial radio (FM and digital), TV and online media platforms across Australia. SXL owns 104 television channels with a secured medium-term affiliation contract with Network Ten and the Seven Network. 

SXL's businesses include Southern Cross Ten, Southern Cross Television, ONE, 7Two, 7Mate, Nine, Go, Gem. SXL has four Digital Joint Ventures, Tasmanian Digital Television, Central Digital Television North, Central Digital Television South and Darwin Digital Television.

SXL owns and operates the commercial radio network in Australia, with 78 commercial radio licenses in QLD, NSW, VIC, TAS, SA and WA.

Southern Cross Media expects underlying net profit after tax, or NPAT, for fiscal 2014 to be 10% below last year, which implies a figure of AUD 80 million.

The revised outlook takes into account a combination of weak regional television ratings attributable to poor performing Channel Ten and the loss in audience reach from the Sydney metropolitan radio station 2Day FM. The defection of 2Day FM broadcasters Kyle and Jackie O to competitor KISS, owned by APN, occurred in the second half of fiscal 2014.

We expect the first half of fiscal 2015 to be comparably weak with the second half of fiscal 2015 showing some improvement.

We revised down our fiscal 2015 NPAT to AUD 80 million to reflect this outlook while our fair value estimate of AUD 1.30 remains unchanged. This is above the current share price and we expect it to drift upwards as the short-term noise surrounding the defection of Kyle and Jackie O begins to fade.

The company has a solid cash flow to support dividend and debt repayment. Yielding a gross 12% the dividend helps offset the short-term risk of the sector.

At the current levels we have an accumulate on the company. 

For more information about Southern Cross Media (SXL) please contact us on 07 4771 4577.