APN News & Media tipped to lead radio revenues by end of year

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APN News & Media tipped to lead radio revenues by end of year

By Madeleine Heffernan
Updated

Credit Suisse says APN News & Media will soon lead radio revenues, while rival Southern Cross Austereo could face challenges.

The companies look similar: they reach one-quarter of Australia's radio audience each, and both have a market value of more than $750 million.

But their shares prices tell a different story. Since January, APN News & Media shares have soared more than 75 per cent, whereas Southern Cross Austereo – owner of top-40 stations 2Day FM and Fox, and rock station Triple M – is down by more than a third.

Australia's capital-city radio stations attracted a record $697 million in revenue in the year to June, Deloitte figures say. Melbourne and Sydney attracted a combined $425.9 million of that figure, with about equal revenue.

Radio ratings released this week showed APN's stations – WSFM and Kiis FM in Sydney, known as Gold 104.3 and Mix in Melbourne – held the No.1 position in the metro market with 26 per cent national audience share. Southern Cross was next with an improved 25 per cent.

Their rival Nova Entertainment, owned by Lachlan Murdoch, dipped to 22 per cent. Fairfax Media, owner of 3AW in Melbourne and 2UE in Sydney, stayed steady at 17 per cent. Macquarie Radio Network, owner of 2GB in Sydney, also stood still at 8 per cent.

Credit Suisse analyst Samantha Carleton has told clients: "APN's KIIS FM and WSFM have gained considerable audience share over the past twelve months, particularly in Sydney. We expect this leading audience-share position to translate into a leading revenue-share position over the next six months."

"We see the potential for a $50 million national revenue and a $20 million EBITDA [earnings before interest, taxation, depreciation and amortisation] shift in the 2015 financial year."

On Southern Cross Austereo, she said: "2DayFm and Triple M have lost audience share over the past 12 months in Sydney and while both stations appear to be recouping some lost ground over the past two surveys, it does not appear to be enough to reclaim the dominant market position. We expect some revenue headwinds as a result."

But CIMB analyst Daniel Blair said Southern Cross Austereo was the winner of survey four, pointing to its strong performance in Melbourne where Triple M is the dominant FM station. He also said the company had recovered 40 per cent of the ratings loss suffered when star hosts Kyle and Jackie O defected to the at the end of last year.

"From Southern Cross Austereo's perspective, while there is still work to be done across the programming schedule ... overall the ratings gains versus the first three surveys of the year are very important," he said.

"This indicates to us that a line in the sand may have been achieved, limiting the revenue-share loss that was implied by surveys one and two. While we will need to see a continuation of these trends in future surveys, this improvement puts a floor under the share price, in our opinion."

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