SXL 50c Party, page-3

Southern Cross Media Group (ASX:SXL)

The radio station owner has dropped from 87 cents to 23 cents in the last 12 months.

It had to undertake a $169 million capital raising to stay afloat during the crisis but Fleck believes it will be well positioned to flourish in better times.

He understands shareholder frustration at selling diluted equity at a discount, but expects the company’s fortunes to improve in line with the broader economy.

Morningstar thinks its fair value is at 38 cents.

“If a company has to go out and issue diluted equity and raise capital from shareholders at prices well below what we think the shares are worth it might be an opportunity to buy more of the company,” Fleck said.

“But it does crystallise some of the challenges in that you’re only getting a slither of what we think the shares will be worth in the long run.

“And that’s what we’ve seen happen with Southern Cross. We think this business has decent growth prospects.

“As consumer sentiment and business confidence returns and you see advertising start to turn up again that [growth] is our expectation.

“But to get from here to there, they needed more equity and that came at a pretty steep cost which is why you’ve seen the shares underperform recently. But we’ve adjusted for that in our fair value estimate and still see value there.”

source: https://unauthorised investment advice/experts/morningstar-backs-this-hat-trick-of-small-caps-for-big-growth/?amp