Scotia Research: Astral a place to be during recession

There might be a recession on right now, but the executives over at Astral Media Inc. (ACM.A:TSX) are making sure their business will come out on top when this mayhem ends. Scotia Capital research analyst Paul Steep boosted his 1 year share price target to $35. Here’s a summary of why:

“Pay TV Pays Off in Q2

Event

? Q2 revenues of $209M and adjusted EPS of $0.55 were above our
estimates of $205M and $0.48 (consensus $209M and $0.50).

Implications

? Our view is that Astral’s strong Q2 is reflective of the firm’s diversified assets and the geographic mix of its operations as the firm exceeded our projections in the quarter. Management’s commitment to deliver solid financial results was reflected in the strong FCF (23% FCF margin) as excess cash continues to be redeployed towards reducing debt.

? We believe that Astral’s results will continue to outperform its peers
during this recession given its mix of assets and exposure to the Quebec market. Astral’s radio division in particular is benefiting from the relative strength in the Quebec radio market.

Recommendation

? Our one-year target price increased based upon revised estimates due to stronger performance across the business and on-going debt reductions.

? A number of potential catalysts are expected to drive Astral’s financial performance in 2009, including implementation of the Virgin brand in key radio markets, increasing subscribers in Pay TV from the launch of HBO Canada, new contract opportunities in Outdoor and the rollout of its new digital billboard network.”

MRM