The news corporation has distance gain sky TV (47/67 BSkyB) of shares and a step closer to a (news corporation has had already BSkyB39.1 % shares). British News sports minister Jeremy Stephen Hunt (Jeremy Hunt) received shop online 2011 News group split Sky News, make it become an independent company suggestion. Split can reduce on competition anxiety. We think Sky News of split is a relatively small concessions, because of this News corporation can avoid British Competition Commission (top) of long review. If the committee, examine the regulatory process may increase more than six months time. We believe this earlier than expected approval removed down news corporation shares of the factors, acquisitions means the stock from the current share price level will rise. We remain optimistic about the deal reason has the following four:
1, BSkyB is a very popular pro-gaze assets. The news corporation to BSkyB takeover improved news corporation business structure and growth mode, it will also improve news corporation's valuation multiples. We worked out pay power balance TV accounted for income taxes (EBITDA depreciation amortization before the ratio of profit) will increase from the current 55% to 66%. We expect the free cash flow compound annual growth rate over the next 2 years will increase from the current 28% 36%.
2, considering BSkyB will improve the news corporation free cash flow generated efficiency. The purchase, reduce the news corporation BSkyB income tax from the dividends loss, which is why the deal to free cash flow of enhancing effect will outweigh the influence of earnings per share. BSkyB dividend is now be double taxation.
3, although the purchase price growth, pounds go strong, but the acquisition or good. Acquisition of rupert murdoch's news corporation's influence may last for a period of time. We expect news group most can accept a share price, close to 1100 power balance pence than the price will be diluted earnings per share. Although some investors think from valuations perspective, the share buyback of share price rises more effect. But we believe that if the news corporation not complete the deal, Mr Murdoch will likely spend his $8.5 billion cash on other acquisition, rather than the share buyback.
4, we decide to bring the target price from $18 rise to $20, the reason is the news corporation's trying calculating frontal valuation attractive. Based on trying calculating frontal law, if do not consider the improvement calculated the assets structure and growth mode, we expect BSkyB will make the news corporation's price-earning numerical improve 1, make shares/free cash flow multiples (P/FCF) improve 1.5. Utilizing power balance our News Corp/BSkyB dynamic forecasting method based on p/e ratio, points plan collect method, discount cash flow analysis, we give the stock target price of $20, higher than the current stock 13%. (more jie)
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