Television broadcaster and publisher Seven West Media Ltd (ASX: SWM) has reported a 5% gain in profit after tax to $236 million. The profit growth was achieved despite a 1% fall in revenues of $1.86 billion and shows management's success in achieving its cost reduction targets which saw total costs reduced by 0.4%.
The problems faced by traditional media companies are well known by most investors. With Seven West Media having exposure to television, newspapers and magazines it has felt the full thrust of these headwinds. While growth will likely continue to be hard to come by, arguably it is fully reflected in the current share price. Over the past year the stock has fallen 18%, while over the last five years the share price is down 67.5%. In comparison, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has gained 10% in the last year and is up a respectable 31% in the past five.
Despite the tough operating environment and poor past performance, here are three reasons to consider adding Seven West Media to your portfolio:
- The media company achieved adjusted earnings per share (diluted) of 20.1 cents per share (cps). With the stock falling 3% to $1.95 on Wednesday after releasing its result, this implies a price-to-earnings ratio of just 9.7x.
- The company is set to pay-out a full year dividend of 12 cps, this equates to an appealing fully franked yield of 6.1%.
- Seven holds the crown as the number one television network in Australia. This is an important attribute as it allows the network to attract a larger portion of advertising spend. While the company faces fierce competition and must work hard to retain its status, it's certainly better to be the leader rather than hold a dwindling market share.
