THE SHARE PRICE has defied recent weakness on the JSE – up more than 30% over the past month, 22% of that coming in the week to last Tuesday. Recently released annual results were a factor, but the way Kagiso Media is handling the incorporation of other media platforms, mainly the Internet, with its traditional broadcasting and publishing interests seems to be encouraging investors.
It’s an issue all media and publishing companies are grappling with. Radio stations are the big business at Kagiso Media and it’s rapidly moving beyond traditional broadcasting, running campaigns where listeners can access radio content and promotions over the air, on the Internet or via cellphones.
Its portfolio of radio stations – including top brands, such as East Coast Radio, Jacaranda and Kaya FM – provide advertisers with access to 8,3m listeners/week. Advertisers are prepared to pay top dollar for that, evident in the generous 51% operating profit margin for broadcasting.
But 50%-owned publishing business LexisNexis (the old Butterworths) is also evolving and incorporating the Internet. Its core business remains content provision, where LexisNexis is SA’s largest publisher of law, tax and accounting university textbooks.
That division’s operating profit margin, though not as high as broadcasting, is nonetheless an abundant 31%. Kagiso Media also sees huge potential in Internet advertising, saying it’s the world’s fastest growing advertising segment.
Investors will be asking whether its share price hasn’t run away with itself. Probably not if you look at the quality of Kagiso Media’s earnings.
For example, net cash generation of R163,4m largely finds its way through to attributable earnings of R159m, so there’s not much cash being absorbed by working capital and other book demands.
Further acquisitions are likely. This share should keep strongly beating the market.