Trinity Mirror looks like it could be reaching for YTD highs with its acquisition of Northern and Shell and its rebranding to ‘Reach’. After successful and extensive cost cutting of £20million, the stock could be on course to rally above £1. Recent announcements show digital revenue has continued to grow with strong growth in like for like display and transactional revenue of 18.2% to £68.7m. Average monthly page views grew by 7% to 682m with two thirds of these page views now on mobile. With 33.4m unique UK browsers in December 2017, Trinity Mirror had more monthly unique browsers in the UK than any other commercial news brand.
The stock is currently trading at just above it’s 5-year low. It is priced on a forward price/earnings (PE) multiple of 3.47 and current P/E of 3.76, yielding 6.7% which is covered nearly six times by earnings forecasts. This would generally be considered value especially if also considering a price-to-book ratio of 0.45. From a yield perspective, Trinity hiked its final dividend by 6.0% to 3.55 pence per share from 3.35 pence the year prior. For the full year, the dividend grew 6.4% to 5.80 pence from 5.45 pence per share.
From a financial perspective it’s possible to regard such a dividend as underpinning medium-term risk, with earnings cover over five times and set to rise, given the proposed acquisition of Northern-Shell is said to be earnings-enhancing.
We have an initial price target of 105p on the stock giving a potential upside of 25% and a potential yield of 6.7%.