Strong economy ‘will drive earnings at Indo’

A STRONG economy underpinning advertising growth will drive earnings at Independent News & Media, according to Goodbody Stockbrokers who have pencilled-in a 15% increase in the share price over the next 12 months.

Goodbody analyst Neil Clifford also believes that cash-burning joint ventures and associate companies like iTouch, Adshel and Clear Channel Independent have become important profit areas and a key dynamic for the group, which owns the Irish Independent.

Mr Clifford, in a note to clients yesterday, when IN&M shares opened at €2.43, said they are increasing their 12-month price target from €2.65 to €2.80.

“While achieving our new share price target would put the shares on a premium rating relative to the sector, such a rating is justified in our view given the stage that the company is at in its earnings cycle and the potential that exists for earnings upgrades as we progress through the year,” Mr Clifford added. He said the upgrade comes in the wake of IN&M’s very positive full-year results for 2004, which resulted in the broker making a number of changes to current forecasts. However, Goodbody’s adjusted earnings forecasts remain broadly unchanged.

“We still believe that the bias for upgrades as we progress through the year is firmly on the upside, with the trading statement in June being the next most likely juncture for us to review our numbers. As regards current trading, it is difficult to see too many things going wrong for the group in the months ahead.” Mr Clifford said the economy is unlikely to change with the result that advertising growth looks well underpinned.

The Goodbody man argues that in Britain IN&M is not wholly reliant on advertising market growth.

“Growing market share to one that properly reflects the circulation of The Independent will in itself be sufficient to deliver significant upside.

Mr Clifford identifies the group’s Australasian operations as potential weaknesses.