Pat McKeough responds to many requests from members of his Inner Circle for specific stock picks as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle. Recently an Inner Circle member asked about the investment prospects of a Canadian media firm whose stock has been down and whose dividend yield is high. Glacier Media specializes in community newspapers and trade magazines and has grown steadily by acquisition. Pat looks at the risk the company incurs with shrinking newspaper sales and with its growth-by-acquisition strategy. He also assesses Glacier’s financial outlook and whether the shares are likely to return to their previous highs. Q: Hi Pat. I’m interested in your opinion of Glacier Media. The shares are down, and it pays a reasonable dividend. A: Glacier Media Inc., (symbol GVC on Toronto; www.glaciermedia.ca), publishes community newspapers in Western Canada, as well as trade magazines and specialty and technical publications that are read by professionals across North America. Glacier has a long history of expanding through acquisitions. In early 2011, it bought 15 trade magazines from Rogers Communications, including Canadian Contractor, Canadian Manufacturing Online, Canadian Metalworking, Canadian Packaging, Canadian Plastics, Hardware Merchandising, Fraser’s Directory and The Northern Miner. In November 2011, it purchased a number of B.C. newspapers from the Postmedia Network for $86.5 million, including the Victoria Times Colonist, Alberni Valley Times, Nanaimo Daily News and roughly 20 community publications. In April 2013, Glacier merged its Weather Farm business with Weather Innovations Inc. It now owns 49% of the merged company, Weather Innovations Consulting, which sells real-time weather reports to Western Canadian farmers and agricultural firms. In addition, the company recently paid an undisclosed sum for vitamindaily.com, a website that focuses on women’s lifestyle topics. Glacier now gets 45% of its revenue from websites and digital data. That helps offset its reliance on print advertising.
Shrinking newspaper operations prompt Glacier to cut costs and sell assets
In the three months ended September 30, 2013, Glacier’s revenue fell 4.2%, to $68.3 million from $71.3 million a year earlier. Revenue at the community newspaper and trade show business (which supplies 96% of the company’s total) fell 4.4%, as the weak economy hurt advertising demand. Glacier’s circulation revenue is also low, as it does not charge for 85% of its newspapers. However, revenue from its business information products (4% of the total) rose 4.3%. In response to the shrinking revenue at its newspaper operations, Glacier is cutting its costs and selling less important assets. If you exclude restructuring costs and the impact of a change in accounting rules, its earnings declined 66.0% in the latest quarter, to $1.1 million, or $0.01 a share. A year earlier, it earned $3.2 million, or $0.04 a share. The stock rose as high as $4.68 in December 2007, but it has steadily moved down to its current price of $1.44. The $0.08 dividend yields 5.7%. In the Inner Circle Q&A, Pat examines the risk of Glacier’s ongoing growth-by-acquisition strategy and its rising debt. He also looks at the company’s earnings forecast for this year and in 2014 and considers whether the shares can rebound and if the dividend is safe. He concludes with his clear buy-hold-sell advice on this stock. (Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.) COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members Do you invest in media stocks, or do you think that the competition and changing nature of the business make it too risky? Does one media stock stand out for you as having been a really good investment?
