Daily ShareChat: Fairfax Media

By Jenny Ruth

Tuesday 19th May 2009

Australia-based Fairfax Media is well-positioned financially to ride out weaker economic conditions and is likely to capitalise on a rebound in the advertising market," says Alan Stuart at Aegis Equities Research.

"However, we see no rush for investors to return into this stock," he says.

His comments followed Fairfax's profit downgrade last week in which it said markets have continued to deteriorate and advertising isn't expected to show any improvement at least for the rest of the financial year.

The company is now expecting annual operating earnings of $A600 million ($NZ768 million), down 10% from the previous year.

Stuart says his forecast was 10% higher than the downgraded guidance and shows the magnitude of the decline in advertising spending has been severe, especially in employment advertising.

Also last week, Standard & Poor's downgraded Fairfax's credit rating from the lowest investment grade, "BBB-" to "BB+" which Stuart says will add $10 million to the publisher's interest costs in 2010.

No longer having an investment-grade rating "may cause problems when it comes to refinancing debt facilities," he says.

Fairfax publishes the DominionPost, Waikato Times, Christchurch Press, Sunday Star-Times and The Independent in New Zealand, as well as owning Trade Me.

BROKER CALL: Aegis Equities Research rate Fairfax Media (ASX:FXJ) as REDUCE

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