What: Over the past 12 months shareholders in leading radio and regional television broadcaster Southern Cross Media Group Ltd (ASX: SXL) have watched on as their shares have plunged nearly 30%. Given that the company owns some appealing assets, namely the Triple M and Today radio networks, it's the type of stock which will be attracting contrarian investors.
So what: Since touching recent lows of $1 the stock is up 18% to $1.18. It gained 4% after releasing its full year results on Wednesday – those results were OK but certainly not great.
The results showed a 0.5% increase in revenue from continuing operations and a 5.6% fall in adjusted net profit after tax. Net debt also remained high at $588 million, however the board still declared a fully franked dividend for the year totalling 7.5 cents per share which represents a yield of 6.3%.
Now what: The revenue growth coupled with the slowdown in profit decline, massive share price drop and high dividend yield will no doubt have a number of contrarian investors sniffing around Southern Cross Media…it could be a smart move.
On the flip side, there are the high debt levels and the potential for further erosion in earnings power. Management stated that metro radio revenue share was expected to remain under pressure in the current half; commentary also remained sombre regarding the outlook for regional radio and television growth.
That's a bad combination and could represent a value trap, so contrarian investors may be best off waiting and watching for a while longer yet.
