UPDATE: ISI Group Initiates Coverage on Time Warner on Multiple Value Drivers

In a report published Wednesday, ISI Group analyst Vijay Jayant initiated coverage on

with a Buy rating and $71.00 price target. In the report, ISI Group noted, “Time Warner's largest profit contributor at $5.3B or 80% of ‘13E OI is the Networks business, is using the expansion of sports programming rights and a step-up in original programming investment to enable significant affiliate fee rate increases, while keeping non-programming costs under control (low single-digits). The company expects to complete every major affiliate agreement starting in the second half of 2013 through 2016. As such, we believe there is significant operating leverage over the next three years for the Networks division, where 7% top-line growth could turn into 10% OI growth when compounded annually between 2013-2016. International cable network operations are also growing strongly, with ~$700M of OI in 2013 heading toward ~$1B possibly by 2015.” Time Warner closed on Tuesday at $62.94.