Analysts Axe Aussie Ad Outlook

12 November 2008

MELBOURNE: According to the entrail-rakers Down Under at CitiCorporate and Investment Banking, Australian adland faces its worst downturn in forty years, triggered by the financial and economic malaise currently sweeping the globe.

In a note published Tuesday Citi soothsayers declared: "In looking at the downturns of the early 1990s and early 2000s we have made one simple assumption: the worst of history will repeat itself. We forecast total advertising expenditure to decline 8.8% in 2009, which implies negative revenue momentum in both fiscal years 2009 and 2010."

And just to ensure that things went downhill a little faster than they otherwise might, the Citi haruspices downrated local media giants Fairfax Media and APN News & Media from 'Buy' to 'Sell'.

The slash-happy seers then marked down their share price targets for broadcasters Ten Network and Seven Network, the former from 90 cents to 44 cents; the latter from A$6.33 to A$5.81. While for good measure they altered their guidance for Ten from 'Buy' to 'Sell'.

Nor were Western Australian Newspapers shares spared the knife, downed by the Citi axemen from A$5.89 to A$5.05.

And lest those of a Panglossian persuasion think there might be a little light at the end of the tunnel, Citi then delivered its coup de grace.

"We forecast Ten, PMP, Seven and PBL Media to trade at a loss through the cycle. This could lead to structural changes in ownership or capital.

"In the event of forced sales of media holdings, we believe a discount of at least 25% is appropriate, given [that] we view the credit market as prohibitive for most potential trade buyers, particularly considering existing gearing levels and trading outlook." 

But, hey, it was a good party while it lasted!

Data sourced from Wall Street Journal Online; additional content by WARC staff