***where to put $720,000***, page-8

1)
Media sector.

Why:
1)
The advertising circuit has turned (ie: bottomed) and will show increasing strength into 2003.
2)
Digitisation will take hold and drive incremental improvements throughout 2003.
3)
The segmentation of the viewing market along AB lines (etc), and across different age segments, will permit for better targetting of programming, advertisicng and choice.
4)
Cost management profiles will see an increasing trend towards outsourcing of production in 2003. TEN already does this with OB and in-studio production through its arrangements with TMS. NINE also does it with TMS through its OB arrangements. In 2003, NINE will also look at outsourcing its in-studio production to TMS. Why? Cheaper running costs due to more efficient capital utilisation rates (ie: continuous cuse of capacity, as opposed to 50% or less overall utilisation, as occurs with most TV networks). SEV is also under pressure to outsource its OB work, and potentially, its in-studio work.
5)
Favoured selections revolve around TV (and broadcast media), but not PayTV, print media, and advertisers. In discerning advertisicng choice, I believe that radio centric companies will lose out next year, as well as the major cinema exhibitors (due to a lower than anticipated standard of product being developed for exhibition - unless The Matrix reverses all this - in Q3/03).

Favour:
PBL, FXJ, RUP, APN, WAN, TEN.

Also favour:
Smaller operators such as SSR, TMS (assuming, Val Morgan is disposed of and Global TV is properly funded), BKI. BKR, SGN.

Avoid:
NCP (except, if the US satellite strategy succeeds).

Also avoid:
SEV, VRL, AEO, AHD, SBC, PRT, AUN, DCL, REG, PMP.


2)
DEVELOPERS AND CONTRACTORS:

Why?

Non-residential construction activity will boom in Australia in CY03. To this, must be added an increasing array of infrastructure development projects (particularly, in NSW), and towards the mining /energy industries.

The increase in this construction /development activity will more than offset the downturn in residential construction and development.

Stocks favoured will include those which have a diversified focus in Australia (ie: geographically, or activity based), and /or an international reach (ie: as Leightons have, into and throughout Asia).

Favour:
DOW, LEI, WSF, LLC, CLO, TSE.

Do not favour:
ABI, any of the residential developers (ie: ALZ, AVJ, DVN, VWD, etc), CEQ, FKP.

Neutral on:
HWE, MAH, MDC.


3)
OUT-SOURCED BUSINESS OPERATIONS (WHETHER IN IS/IT, OFFICE SERVICES, FINANCIAL SERVICES, BACK OFFICE FUNCTIONS, ETC).

More, on this, later.