Media General Has Upside Potential...In 2016, Benchmark Says

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In separate reports published Thursday, Benchmark analyst Daniel L. Kurnos maintained a Buy ratings on Media General Inc MEG, while reducing the price target from $25 to $21, while saying there was “significant 2016 opportunity.”

While noting that 2015 appeared to be “somewhat of a transition year,” analyst Daniel Kurnos said that there was substantial upside to the consensus estimate for 2016, driven by:

  • More than 30 percent growth in gross retrans, with 90 percent of the sub base up for renewal through next year
  • Chances of political exceeding Benchmark’s forecast of $190 million, which already reflects 13 percent growth from the 2012 figure of $168 million
  • The company generating digital revenue of $240-$260 million, representing more than 40 percent y/y growth and reaching 50 percent of all Internet households, “which should drive industry-leading CPMs”

“We also expect Media General will participate in the upcoming spectrum auction, noting that an estimated 70% of the Company’s $635 million in NOLs are likely to be unrestricted through 2016, which could offset nearly all tax consequences depending on the assets sold,” Kurnos wrote.

In the report Benchmark noted, “Shares of Media General trade at 9x our 2015/2016E blended EV/EBITDA, at the higher end of the current trading range but at the low end of historical norms. We believe our 2016 estimates are conservative, with Media general poised for several years of strong growth. As such, we believe a 10x multiple on our blended EV/EBITDA is warranted, resulting in a $21 per share price target.”

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