Shares in Trinity Mirror (TNI) gain 6.7% to 80p as the newspaper publisher unveils a £10 million share buyback programme alongside its interim results.
Results from the owner of brands including the Daily Mirror and Daily Record reveal continuing declines in underlying revenue, mitigated by solid cost control.
Debt has now been more or less eliminated although its pension deficit is higher because of lower long-term interest rates.
When assessing a buyback investors need to decide if the stock is cheap relative to its intrinsic value.
Optically the company looks cheap on just 2.3 times 2017 consensus forecast earnings per share.
However, it remains to be seen how the company can arrest a decline in its traditional print publications, so perhaps this discount is justified.
On a like-for-like basis group revenue is down 7.8% year-on-year in the first six months of the year and Trinity indicated the situation worsened in July, down 9% year-on-year.
Overall, revenue advanced 29.9% after Trinity acquired the remaining stake it did not already own in Localworld, a regional publishing joint venture.
Numis and Liberum remain buyers on valuation grounds. Numis has a price target of 210p, while Liberum is even more bullish with a 275p market.
The latter comments: ‘With the shares at 2x adjusted earnings (ex-the share buyback), a 7.6% FY16E dividend yield and net debt almost eliminated, the shares are very attractive regardless of opinions on the progression of newspaper advertising.’
