Southern Cross Media
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- Indepth analysis of ASX listed shares
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The tragic death of British nurse Jacintha Saldanha following a hoax call from DJs at 2Day FM reveals just one of the risks of owning radio and TV stations.
Southern Cross Media Group, better known these days as Southern Cross Austereo, suspended advertising on 2Day FM for three days and will donate all advertising profits from 2Day FM until the end of the year (or at least $500,000) to 'an appropriate fund that will directly benefit the family of Jacintha Saldanha'.
Of greater concern to Southern Cross’s shareholders, at least to their wallets, is the net debt of $610m, making for a net debt to equity ratio of about 40% – and that’s on a balance sheet swollen with intangibles (mostly radio and TV licences). The net interest bill is covered only three times by earnings before interest and tax.
And all of this at a time when TV and radio assets are under intense pressure from the proliferation of online media alternatives and the weak advertising market.
No wonder the shares look cheap, with a prospective price to earnings ratio of 8.2. But given the debt and the uncertainties over earnings, it’s not cheap enough for us. AVOID.
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