SEV - Seven Network

[The Barbarian Investor]

Hi everyone..any thoughts on 7s Preference shares?

See part of note below from Commsec

We are pleased to offer you the opportunity to invest in Seven Network Limited (“Seven”) through the issue of a new class of preference shares by Seven called TELYS3 (“Transferable Extendable Listed Yield Shares”).

TELYS3 offer semi-annual, floating-rate dividends at a margin of 2.50% over the 180 day Bank Bill Swap Rate including the value of franking. The minimum cash rate for TELYS3’s first dividend period will be 5.88% p.a. which provides an effective yield of 8.40% p.a. after including the value of franking.
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Note: This web page is not an offer document. It has been prepared to enable you to apply for TELYS3 should you wish to do so. Details concerning this offer appearing on this web page have been taken from the prospectus issued by Seven and dated 6 April 2005 and expires on 5 May 2006(the “Prospectus”). The Prospectus has been lodged with ASIC. The Prospectus is important and should be read in its entirety.

 

[zolow]

Hi all, this one has been really quiet,

I have been looking at SEV for a while. It looks to me like they are reasonably good value at the moment:

1. Low debt
2. Low P/B
3. reasonable dividend yield ~6%ish at current prices
3. good brand name (haven't checked if this is priced in or not)
4. I think most of their recent loss has been due to loss of ratings, and the fact that Leckie has been really Ill etc... It seems to me that the reduction in share price has been disproportionate, to the reduction in earnings. However looking at recent announcements they seem to be doing okay in the ratings department. (would like to know if anyone thinks differently)
5. 2008 Olympics should give them a ratings boost in the near term, might be a good one for short/medium term???
6. content selection has been getting better (at least in my view, then again maybe my idea of what's good viewing has changed)
7. Management also seem to be making a good decision about buying back shares at a good time (i.e. when share prices are low)

would appreciate input from anyone more experienced in analysing this arena... I tend to err on the side of being to positive and not so good at looking at the negative.

I do not hold

 

[zolow]

Just picking up on a comment from ROE on the WES thread...

these guys are trading way below their BV. And currently have a lot of cash in the bank currently more than their MC.

My reasons for liking this company are set out above.

does anyone have any opinions?

 

[sutti]

I love Seven at the moment. Trading below BV, very little debt, Strokes owns a huge piece of the pie and the SP is at a big discount to my estimate of intrinsic value.

I have quite a bit on Seven but don't think I'm aloud to put them up because it might be considered advice. PM me if you want it though.

 

[prawn_86]

Sutti, you can say what you want providing you have research to back up your facts, and that you are not recommending that other members "buy", "sell" etc etc

Please share your reasons as to what your calcs for intrinsic value are

 

[sutti]

I've copied and pasted pieces from my commentary below (just the outlook comments). Financial analysis is to hard to copy and paste so let me know if you want me to send you that in pdf. My intrinsic value calc is the top end of $13. Do not share with people how I get this as it has taken me to long to work out how I figure it out so I'm not handing it out for nothing sorry. It is a mix of current earnings and future estimates and does not take into account goodwill and management, purely financial figure which would be higher if you want to include good will.

There is no question that Seven’s ticker will continue to be very volatile over the next 12 to 18 months. If our economy continues to slow, this will have an adverse affect on Seven and it’s media peers. The negative market sentiment that will hang around our markets for the next year will temper Seven’s stock price, due to fact that Seven is heavily invested in securities. We question Seven’s approach to West Australian Newspaper’s. The industry and WAN is struggling to adapt to the new reality of the internet. One plus for the investment case in WAN is there monopoly in newspaper advertising in Western Australia, they literally have no opposition in their market. Seven’s 50% stake in the Seven Media Group, which comprises the channel by name and Pacific Magazines is heavily reliant on television revenues (split television 80.6% to magazines 19.4%). Television revenues are largely dependent on advertising that are subject long-term to changes in digital television, the ability of people to fast-forward or change channels to avoid the advertisement. We reiterate that this a long-term factor, which we most likely will not see for many years.

Counter to this, the reasons for investment are compelling. It passes many of our tests. In a world were it is extremely difficult to find companies trading below book value, Seven is. Seven has no debt and Kerry Strokes, the Executive Chairman of Seven holds a 44% stake (which will increase to app. 56% after the share buy-back). Management’s capital is on the line, so obviously they are not going to do anything to harm their financial position. Seven’s dividend yield of 5.2% is also quite healthy.

We feel that Seven’s stock price is depressed, but there is stillroom for a further drop, if we see weaknesses in our home economy increase. If this is the case, Seven’s stock price could easily fall back another dollar to the lower $5 range.

We are happy to invest at these prices, Seven is trading at a significant discount. The investment case will strengthen if Seven further drops between $4 and $5. Representing a 45 to 55% discount to book value.

Do note though that this is not advice. My investment partnership does not have an AFSL so it is purely my own commentary for personal use.