IN&M shares boost on cards, says Merrion

INDEPENDENT News and Media (IN&M) shareholders, who have seen the value of their shares plummet over the last three years, could be in line for a share price boost, according to Merrion Stockbrokers.

Merrion's positive stance comes in the wake of a massive increase in profits at IN&M's 44%-owned Australian subsidiary APN News & Media Ltd (APN), which reported a record net profit for the 12 months ended December 31, 2002, of AUS$90.2 million (50.77m), up 87% on the previous year.

IN&M's share price has fallen from a 2000 high of €11.17 to an opening seven-year low of €1.27 yesterday.

Its market capitalisation has collapsed from €2.8 billion in 2000 to €731m a drop of more than €2bn in less than three years. IN&M shares rose 6c, or 4.7%, to €1.33 yesterday.

Merrion analyst Niamh Brodie, who re-rated the shares a buy in December when they traded at €1.45, remains upbeat.

"We upgraded IN&M to a buy in recent months based on early signs of an improving operating environment, which looks increasingly solid with this announcement," she said following yesterday's positive results from APN.

While the group still has both financial and strategic risks, in our view the risk/reward profile is attractive."

Ms Brodie says all trading divisions at APN are performing in line with or above expectations this year and in aggregate the group is trading significantly ahead of the first quarter of 2002.

"We would view this as a strong positive for IN&M's 2003 outlook. The stronger momentum in the second half (group profit up 7% on a like-for-like basis) would indicate that our expectation for 4% trading profit growth in APN in 2003 now looks light," she said.

Ms Brodie said that in terms of IN&M's result, APN's trading profit performance is equivalent to €2.3m, or 1% of the group's pre-goodwill and exceptional trading profit.

"However, the minority interest charge was A$6.6m ahead of expectations the minority charge relates to Clear Channel's stake in the radio business and the divergence from expectations may be related to the exceptional gain," she said.

APN pursues a generous dividend policy. Yesterday it increased dividends by 8% to 16c, which will generate more cash for IN&M.

However, IN&M's 6.1% dividend return, one of the highest in the sector, is doing little for its share price.

IN&M is due to announce full-year results on March 26.