This was published 16 years ago
Stokes needs to get own house in order
Seven has several issues that require the billionaire's full attention, say analysts.
By Xchange
AFTER West Australian Newspapers' shareholders thwarted Kerry Stokes's attempt to topple their board last week, the market has quickly turned its attention back to the Seven Network itself.
The billionaire has spent a lot of time and money seeking to secure board seats at his home town's monopoly newspaper, but having gone down in Perth (at least for the time being), analysts said, there was a range of issues he needed to address at Seven.
"I think Stokes has got plenty of concerns at the moment," the media commentator Peter Cox said, citing Seven's softer television ratings since the start of the year and question marks over its internet strategy and investments in companies like Unwired and Engin.
Channel Seven has struggled to continue last year's stellar run, in particular losing younger viewers as its rivals gained ground with blockbusters like Ten's So You Think You Can Dance and Nine's Ramsay's Kitchen Nightmares.
Deutsche Bank cut Seven's target share price from $12.15 to $10.40 after the WAN vote, largely because of the "combination of disappointing ratings, a deteriorating consumer environment and ongoing cost pressures", which could hurt TV earnings.
The broker kept its "hold" rating as the price target is still some 10 per cent higher than yesterday's close of $9.45.
"Seven [Network] has large cash and investment holdings, but apart from assembling a collection of content distribution platforms and an unsuccessful move to secure board representation at WAN, there is limited transparency on future strategy," Deutsche's media analyst, Andrew Anagnostellis, said.
Ten short of $70m
Ten Network has found it harder than expected to refinance a $700 million syndicated loan facility. With the turmoil on global credit markets tightening the money supply, not all Ten's banks have agreed to roll over the facility that is due to expire in December.
Xchange understands that Commonwealth Bank, a senior manager for the previous facility in 2003, declined to join the Westpac-led consortium this time, leaving Ten about $70 million short of its old credit line. The broadcaster has secured a three-year, $630 million loan facility from Westpac, ANZ, National Australia Bank, Toronto-Dominion, Citi and JP Morgan.
Unpalatable
Citi has countered the groundswell of negativity about the Brambles share price by upgrading its price target on the warehouse pallet provider from $9 to $10.50.
Barely a week after the same broker slashed its price target from $11.25 to $9, Citi believes the market has overreacted to Wal-Mart's plans to review its arrangements with the three key suppliers of pallets in its distribution centres.
While Wal-Mart plans to charge US43 cents for sorting and managing each pallet in its warehouses, Citi reckons this could have a "potential margin hit" of $US46 million ($49 million) on Brambles.
The broker said the recent 11 per cent fall in the Brambles share price implies a $US90 million margin hit, but Citi said there was still potential for its CHEP pallet business to recover costs from the proposed surcharge by making Wal-Mart repair its pallets, by passing on the surcharge to customers, and by even playing hardball and restricting Wal-Mart's free use of the millions of CHEP pallets that lie idle in its centres.
"The pallet pooling model clearly isn't broken, but negative sentiment will weigh on the stock for at least six months," the broker said. Yesterday, however, Brambles shares gained 5 cents to close at $8.90.
FIRB furphies
Reports of the Foreign Investment Review Board telling Chinese companies to hold off on investing in Australia seem to have been exaggerated.
Cape Lambert Iron Ore said yesterday that China Metallurgical Corp had not withdrawn its application to buy its Pilbara magnetite project for $400 million.
Indonesia's Antam and China's Zhongjin have said they will resubmit a FIRB application as part of their joint bid for Herald Resources to avoid a 90-day extension to the original application. Meanwhile, Apollo Minerals - an iron-ore hopeful with an early-stage project near Cape Lambert's project - is expected to announce an unnamed top-10 Chinese steelmaker will increase its stake from 12 per cent to 19.9 per cent, subject to regulatory approval.
All shook up
The regional pay TV provider Austar has been busy trying to dispel market fears about what an economic downturn and its recent price increase might do to subscriber numbers.
While its churn rate - an indicator of subscription cancellations - jumped to a four-year high in the first quarter, the company said cancellations have slowed in the past two months.
Pay TV "is more relevant than ever, as households tend to reduce external entertainment spending and increase time spent at home", the chief executive, John Porter, argued in Austar's annual report published yesterday.
Analysts at Citi have a different view. Looking at US pay TV operators during the economic downturn in 2001, they said subscriber growth slowed and churn rates rose.
The broker cut its EBIT forecasts for Austar by 7.7 per cent and 11.6 per cent, respectively, for this year and next, and maintained its "sell" rating on the stock.
Austar seems more concerned about a different threat. With its free-to-air rivals seeking to show major sporting events on their new digital channels, Mr Porter called on the Government to "create equivalence between all multichannel players.
It would be completely untenable for free-to-air networks to be allowed to broadcast sports
on the antisiphoning list on their multichannels."
Xchange
EDITED BY
MIRIAM STEFFENS