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Media group APN attacks analyst's report

Nick Tabakoff | November 13, 2008
Article from: The Australian

LOCAL media group APN News & Media and its major shareholder, Irish-based Independent News & Media, have both launched a strong attack on Citi.

They are accusing the global investment house of "highly irresponsible" behaviour over a local analyst's report released this week.

APN has been particularly vocal, claiming "factual errors" in a downbeat report on the media sector by Citi analyst Digby Gilmour saw it present overly bearish earnings and share price forecasts for the local media group.

The Citi report comes at a particularly sensitive time, as the Irish-based INM tries to find buyers for its 39 per cent stake in APN against the backdrop of the global credit crunch and falling ad revenues for media groups.

INM is believed to be looking for a full takeover of APN as a way of generating a maximum price for its stake.

It is understood representatives of APN contacted Citi on Tuesday to express their objections to Mr Gilmour's report. Following the calls, Mr Gilmour upgraded his target price and profit forecasts for the group.

Mr Gilmour's initial report -- titled "The Worst Advertising Downturn in 40 Years" -- had slashed his target price for APN by 59 per cent, from $2.88 to $1.19 a share, despite a recent rise in the company's share price since INM announced the sale process.

This angered APN, who released a statement yesterday lashing out at the assumptions on which the original report was based. "At issue here are some fundamental factual errors made in the original report in relation to APN: namely, the failure by Citi to take into account the full impact of its EBIT forecast on minorities; and incorrect assumptions regarding interest rates," aspokesman said. "As a result, the analyst in question has acknowledged that his earnings projections for APN were out byas much as 24 per cent."

A revised report has seen Mr Gilmour revise his $1.19 a share target price for APN up to $1.53 but this figure is still 47 per cent down on his target price before this week. He has also amended upwards his 2009 and 2010 estimates for APN's earnings, acknowledging his original forecasts had "not previously taken into account" the full impact of its EBIT forecast on minorities.

His admissions have attracted criticism from APN's spokesman. "At a time when investors are looking for accurate guidance, it is highly irresponsible to produce research reports that contain basic errors such as these," the spokesman said. "Investors would be better off just reading our financial statements, which ... highlight a solidly performing, diversified media company."

But Mr Gilmour reiterated his downgrade of APN from a "buy" to a "sell" recommendation. He also repeated claims that it represented a "forced sale".