Good Value, page-42

Hi Crocketc,

thanks for your post. I fully agree with you that the P/E ratio is only as good as the last numbers provided and are not a reflection of what the future may hold.

My main reason for buying this stock though, is that I believe that the current downturn is only cyclical and that as the economy recovers so to will PRTs earnings. On that basis I see PRT at the current price as being oversold.

I also agree with a lot of commentary that Free to Air broadcasters will lose market share to what is termed 'New Media'. What I don't believe though, is that this will happen overnight or even in the next one or two years. Yes it will happen and is happening but if the FTA broadcasters can stay on the front foot and the reduction in licensing fees and other government regulation is abolished, then they have a more than even chance of remaining competitive over the long term.

Why do I believe that the current downturn is only cyclical?

A few posters have stated that PRT is on a continuous earning decline, I disagree. If you look back at the last 10 years and what the revenue has been you will see that the average is 250 million. Their end of year showed revenue of 253 million for FY 15, slightly above their 10 year average. Yes they may only be moving sideways the last few years and showing very little in the way of growth but then so too should the share price.

Profit for the last 10 years shows an average return of 27.8 million. The latest trading update forecasts a core net profit of between 23 - 24.5 million. Yes this is below their ten year average but not greatly out of sync to what their profit has been for other years in the past. It definatly, in my opinion, does not justify the fall in the share price that we have seen.

Earnings per share (my favourite valuation of a company), shows a return of 10.3 cents over the last 10 years with and average 10 year dividend payment of 7.9 cents. For the last 5 years it is 9.5 and 6.4 cents.

This year is likely to be the 2 cents already paid plus maybe at a guess 1.5 cents, ie 3.5 cents for the year on (again this is a guess), EPS of 6.2 cents. This is well down on the average but nothing new looking back at past performances, 2010 for example (just after the start of the GFC) gave a dividend return of 2.6 cents on an EPS of 2.63 cents.

So, in my opinion, looking back at the past performance of PRT we have on more than one occasion been in this position before but never before has the share price been this low in relation to earnings.
(In 2010 the lowest point was 53 cents per share and the Book Value per share was 10 cents less than what it is today).

As I have mentioned before I could be completely wrong on this and totally missing something that I have failed to take into consideration. Going by the number of shareholders selling their stock a lot of investors obviously have a different opinion to mine. If another poster can shed some light on why the sell off has got to these levels and may continue on the downward slope please let me know.

It's always a little daunting buying up stock when the market is moving in the opposite direction but unless Australia goes into a major recession, I can't see why PRT isn't a good investment at the current price.

As always, looking forward to other posters views and points of discussion.