Shares of Fairfax Media Ltd [ASX:FXJ] gained more than 3% on Wednesday, rebounding after a poor start to June.
It has been a rough few years for media companies in general and Fairfax Media in particular. With the company seemingly getting its finances back in order, it’s possible that investors will start to see some value in the $2.1 billion Aussie media company.
To repair its balance sheet, Fairfax has had to sell a number of its profitable and fast-growing online media businesses.
In effect, the company has forgone potential future revenue growth in these businesses in exchange for getting the cash upfront by selling now.
An important hurdle for Fairfax to overcome is the soft advertising industry. Media companies live and die by the amount of advertising they can sell in newspapers and online.
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However, despite the global nature of the internet and new media companies, Fairfax still has a strong presence in the Aussie market. It will now be up to Fairfax management to find a way to grow revenue and profits in a ‘post-newspaper’ world.
Investors may also look at the possibility of Fairfax raising the dividend again. The company recently doubled the dividend to two cents, giving it a 2.8% dividend yield. If Fairfax can increase the full year dividend to 2.5 or 3 cents, it could result in a big bump for the share price.
Cheers,
Kris+