Wednesday, October 16 09:13:14
The ISEQ is falling this morning and is currently at 4,312, down 10 points following yesterday's surge as markets again focus on the US and the fear of meltdown re-emerges.
Davy Stockbrokers reviews INM and sees lots of positives:
We are upgrading our 2013 and 2014 EBIT forecasts for INM by 12pc and 1pc respectively. INM's trading update on October 15th showed a marked improvement in the advertising revenue performance compared to the first half of the year.
It is clear that the slowdown in the rate of decline in July and August has persisted through September and into October.
We expect INM to reduce operatingcosts by at least E15m in 2013 and by a further E8m in 2014. It is these cost savings that will defend the group's earnings and free cash flow over the near term. The completion of a successful restructuring will reduce INM's net debt by E316m to E106m by end-2013 and lower net debt/EBITDA to 2.7x. Irish economic conditions conspired to cause a 94pc decline in property advertising and an 88pc fall in recruitment advertising.
Recent indications suggest that the Irish property and recruitment markets are beginning to improve, which should drive a recovery in adverting revenue over time. EBIT margins have fallen from 24.4pc to 10.8pc, with every E1 decline in the revenue line resulting in a E0.52 fall in operating profit.
We estimate that if half of the decline in property and recruitment advertising can be recovered, this alone would lead to incremental earnings of E14.5m, a 48pc uplift to our 2013 forecast. Upgrading rating to 'Outperform'
We believe that the worst is now behind INM, that operating conditions are showing signs of improvement and that the restructuring of the balance sheet is almost complete. Net debt/EBITDA will fall to 2.7x in 2013 while interest cover will increase to 3.8x in 2014 from 1.6x in 2012. We estimate that, through free cash flow alone, equity holders can expect a return of 140pc over a five-year period. We are increasing our rating to 'Outperform' according to Davy Stockbrokers.