TD Newcrest analyst Scott Cuthbertson rolled out a fun comparison of two of Canada’s most ‘steady as she goes’ media companies.
In his comparison of Corus Entertainment Inc. (CJR) and Astral Media Inc. (AAIAF.PK), Mr. Cuthbertson notes that the two companies have become even more similar since Astral bought Standard Radio and won the Toronto Street Furniture advertising contract.
Both have similar capital structures and revenue mixes. And both derive a large portion of their revenue from subscriber fees for their specialty cable and pay television offerings. That makes them much less reliant on advertising dollars than media companies that operate conventional television or newspaper businesses.
Much of the subscription revenue is locked in, providing a clearer picture of what the two companies’ income statements will look like in coming quarters.
Throw in stable management, relatively clean balance sheets and the fact both companies are trading near their 52-week lows (most media companies are these days) and that’s enough for Mr. Cuthbertson to recommend buying in at current valuations.
Assuming zero EBITDA growth, either stock should provide a decent return over the next two years even if valuations only partly recover, he concludes.
No stock is immune to the economy but we believe adding to positions in either of these names at current levels will be well rewarded over a 12-24 month time horizon.