Monday, November 05, 2007

Media Season

The general elections heralds a great revenue harvesting season for newspapers and general media and this one is no different. ScanGroup, NMG and Standard should all benefit from the season. Price is not everything. Many of us when buying stocks will normally look at the price and say, aah, its too expensive. This applies very much to NMG. Despite rarely trading at less than 240 (with exception of brief market-wide blip in March/April) this year, the stock has found buyers impressed not just by its bottom-line, but the future Nation Media Group.  It has outperformed Standard over the last 6 months and ScanGroup over the last two.

 In one year, NMG has moved into UG with TV, brought a business newspaper into the country, launched a cheap newspaper Metro to compete with Nairobi Star, launched daily shorts of its NTV news on you-tube, removed entry requirement apart from its premium content. In any other year, this would have been unprecedented but coming in the same year as the general election, is awesome. In addition to the above, NMG also runs NTV, Easy FM and a publishing house. 90% of its revenue comes from newspaper sale and magazines. It now has presence in TZ and now has a vision for the whole of Africa. Despite some "issues" when new CEO joined, NMG saw 24% rise in its PAT for first half of the year compared to prior year and should comfortably beat its previous 3 years' annual growth in PAT.
Standard Group continues to lag in the shadow of its bigger expansive brother and perhaps some misguided steps. Despite this, the STG saw profits double in 2006. It also awarded patient shareholders 1;8 shares
which seem not to have materialised yet. The group also owns KTN, Baraza and PDS, a publishing arm. STG was upgraded into MIMS in Feb thus making its shares more marketable. STG has also invested in its state-of-the art printing press which should considerably reduce its printing costs. It has revitalised its management.
STG continues to suffer on several fronts however, staff turnover is high and its flagship TV arm recently lost a whole set of its stars to Citizen. Secondly, advertising revenue which it never had a great deal to start with has been reduced by its perceived anti-current regime stance (I wonder why?). However, increased circulation and viewing figures should give it bumper figures.

Lastly, ScanGroup. The group has since its listing gone on a spending spree, restructuring of its staff reward scheme to include loyalty shares aka employee share options and expansion to regional and continental markets depending and widening its product offering. Its shares suffers from nervousness about staff loyalty (very important in the adverting world where clients accounts will be managed by one or two creative-types) and generally too much supply of its stock. Again, this season should see increased advertising revenue and give it a typically bumper second half. Long-term, the group's activities this year should mean increased revenue in coming years though concerns remain on its cashflow.

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