Fairfax Media Limited has a brighter outlook for these 3 simple reasons

Share price recovery is strong and moves to build up digital media is showing returns.

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published May 9, 2014 8:04 am AEST

Fairfax Media Limited (ASX: FXJ) has been on the rise since hitting a low in October last year, climbing about 81% since then to $0.98. During the same time, the S&P ASX 100 Index (ASX: ^XTO) has been a little range bound, only gaining about 2.3%.

The media company, known for its holdings of radio and print media, is adjusting its business to the irresistible wave of digital media. The market is beginning to see some changes in its restructure that are giving it hope of a revival.

Reducing costs in traditional print media: The company is cutting some jobs within its newspapers to shore up the ongoing falls in the segment's revenue, which saw a 9.8% revenue decline in its Metropolitan Media in the first half of FY2014.

Linking up with other media companies: There has been talk in the media that it may plan to join up its print media in some way to that of APN News and Media Limited (ASX: APN). Similar to Fairfax, it has a portfolio of media assets in both Australia and New Zealand and operates newspapers like The New Zealand Herald, as well as regional newspapers.

APN hasn't mentioned Fairfax directly, yet did acknowledge that it is in talks with other publishing businesses regarding collaboration and partnerships to reduce costs.

Digital media and Domain: The segment with the greatest percentage growth was its Domain online, up 33%. Fairfax operates the domain.com.au property listings website, number two in market size after realestate.com.au, owned by REA Group Limited (ASX: REA).

Both the print and online Domain have excellent EBITDA margins a little over 40% in the first half. The company is making its property listings business a high priority since it had the market lead in traditional print. Now it wants to foster the digital growth more.

It has that long experience in media and advertising that it can use to challenge realestate.com.au for market share. At the same time, work on raising its position in job classified listings against competitors like SEEK Limited (ASX: SEK) is progressing with a tie-up with Adzuna, a job aggregator.

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