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November 02, 2004

Good Results for SBS Broadcasting

Northlake's latest purchase on behalf of clients, SBS Broadcasting, reported third quarter EPS yesterday. The results were basically in line with estimates and the company reiterated its 2004 guidance....

Revenue growth was a little better than expected with TV operations (over 80% of the company) leading the way. Revenue in the smaller Radio and Print divisions was as expected. EBITDA fell slightly short of estimates as the company moved the launch of its fall TV season forward shifting some fourth quarter expenses into the third quarter. Adjusting for these expenditures, the top line outperformance would have flowed through to EBITDA. Management suggested on the conference call that the vast majority of these expenses will not repeat in 4Q and reiteration of guidance confirms this fact. Initial audience reaction to the new fall season shows rising ratings in seven of nine stations, which means that the shifting of costs may have paid dividends.

Radio results are still lagging and will be a point of contention given issues in the U.S. radio industry. However, radio in Europe is early in its consolidation phase and has a much lower share of advertising expenditures, meaning that the parallels with the U.S. may not be accurate.

Overall, the quarter, the conference call, and discussion of the 4Q04 and 2005 outlook reinforced my enthusiasm for the SBTV shares. Trading at less than 7 times 2005 estimated EBITDA with prospects for mid single digit organic revenue growth and margin expansion, SBTV shares look very cheap. A strong balance sheet and a good track record on acquisitions reinforce my confidence.

Posted by Steve Birenberg at November 2, 2004 08:21 AM in SBTV