Belo: Newspaper & TV Split Would Unlock Value - Barron's

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How to Fix an Old-Media Stock by Andrew Bary

Summary: TV stocks ascend as audiences grow and advertising and retransmission fees from cable/satellite companies generate profits. Belo (BLC) has 19 highly-ranked TV stations in fast growth areas like Texas and Seattle, and four newspapers. Takeover candidates and competitors NexStar (NXST) and Lin TV (TVL) have both doubled this year, but despite Belo having made half its projected annual revenues of $354 million and 70% of its $91m cash flow in Q1 already, newspaper revenues (-11%), and cash flow (-10%) took Q1 profits down to $0.15 from $0.16 in Q1'06. Analysts project $1.05/share profits for 2007, down from $1.19 in 2006. If Belo's TV and newsprint were to split, bulls see $30 shares: Belo's TV channels at an industry average of 13.4x 2007 cash denotes $20.60 shares, near its current $22. And 8x cash for its newspapers would add another $10. The controlling Decherd family doesn't want to sell, so hiking Belo's $0.50/share dividend (2.2% yield) to 5% from the $1.60/share cash flow generation would please shareholders. Belo's $2.3 billion value, with $1.3b of that debt or 3x cash flow, makes leveraged share buybacks possible too.

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BLC 1-yr. chart: