Given subsidiary Euromoney Insitutional Investor (ERM) had released its own relatively downbeat update yesterday (22 Jul) newspaper publisher Daily Mail & General Trust (DMGT) might have expected a more measured reaction to the news its full year numbers (covering the 12 months to 30 September 2015) will be at the lower end of expectations.
Instead the shares are off 10.7% to 829.5p as investors get yet more evidence of what happens when highly rated stocks disappoint. At yesterday’s close of 929p the company traded on a September 2016 price to earnings ratio of 14 times. This is much higher than comparable multiples of 4.5 times and 4.2 for peers Johnston Press (JPR) and Trinity Mirror (TNI) respectively.
A premium is justified due to its large business-to-business (B2B) portfolio and more advanced digital arm but, as today’s announcement demonstrates, the company is itself not immune from the decline in print advertising.
DMGT saw revenues fall 3% in its third quarter due to a ‘marked deterioration in the UK print advertising market’. MailOnline digital ad revenues of £1 million only partially offset a £7 million decline in Daily Mail and Mail on Sunday revenues.
Westhouse reiterates an add recommendation and £10.46 price target and says it should ‘not obscure the group’s positive long-term fundamentals’ It adds that these include ‘an attractive combination of quality B2B assets and an increasingly digitally focused Media division’.