Why SWM is worth more than $1.50 per share, page-179

I think @andrewan is absolutely correct in his points.

The market nowadays is more and more consisting of passive flows whereby investors buy the index ETFs rather than investing through active managers who seek out value/growth of individual securities and thereby assist the price discovery process. Right now the only fund managers that I know of who are actively discovering the absurdly cheap value on offer in SWM are Spheria Asset Management and Collins Street Value Fund.

In the last Covid-19 downturn Wilson Asset Management also took a large stake in SWM but they tend to be more momentum driven ie once SWM starts going up in price watch them start to get on board and chase the price higher.

The smartest active manager in the room is undoubtably Matthew Booker at Spheria Asset Management. Matthew Booker has demonstrated a remarkable amount of foresight around SWM in the last few years. Google Matthew Booker and Seven West Media to find a whole bunch of his commentary in the Australian Financial Review and the Age back when SWM last went through this same cycle during Covid-19. Its the same cycle this time around except SWM isn't overloaded with debt (current net debt/ EBITDA of 1.3x including the 20% ARN acquisition),digital earnings now comprise 49% of its profits and SWM has market share of approx 40% in Total TV compared to 35.5% during Covid - all of which mean the rebound in revenue and profits will be even stronger this time around.

Dividends are a massive reason why Australian Investors buy a particular stock- largely due to the benefit of franking credit refunds which are particularly popular with self-funded retirees. In the US where such a system does not exist generally buybacks are the preferred mechanism for capital management initiatives and hence there is less desire for a dividend paying company in general. This is a significant reason why SWM will re-rate and that is because once prevailing ad market conditions normalise and the dividend is reinstated, the business can easily support a 4-cent per year dividend at a 40% or less payout ratio.

Once a dividend is reinstated then a much, much higher share price will result. This will then consequently allow for SWM to gain entry back into the ASX300 index and enable the momentum from passive investors to continue to drive the share price higher.