* We update the NWS valuation for our FY11 EBIT estimates.
Impact
* Our updated valuation of A$28.05/sh is a 16% increase on our previous valuation of A$24.18/sh.
* We continue to have a bullish outlook on NWS primarily based on:
* Television and newspapers which we expect will see a cyclical uptick in FY11 even with ongoing structural problems;
* Film continuing to deliver strong earnings streams with the increasing number of distribution platforms and devices (DVDs, video on demand on television, iPads, Apple TV and intelligent televisions) increasing the number of sales opportunities for movies, with these multiple consumption mechanisms smoothing box office volatility; and
* Cable networks, which should continue to see rate hikes for the next two or three years in news, sports and general entertainment.
Earnings and target price revision
* We upgrade our target price to A$28.05/sh from A$24.18/sh.
* No changes to earnings.
Price catalyst
* 12-month price target: A$28.05 based on a Sum of Parts methodology.
* Catalyst: FY10 full year result in August 2010 likely to provide robust commentary on FY11.
* We expect the weak performance of TV in the second half of FY10 (where NWS was unable to renegotiate weak upfront TV bookings made in June 09) will be one-off in nature and doesn't change our positive FY11 outlook.
* Maintain Outperform recommendation.
NWS Price at posting:
$17.24 Sentiment: Buy Disclosure: Held
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