SYDNEY (Reuter) — Rupert Murdoch’s News Corp. Ltd., enjoying a steep rally in its shares, is poised for a record profit of around $ A1 billion ($ 677 million) in the latest year to June 30, nailing shut the door on its debt-ridden past, analysts said.
The global media and entertainment group, which only recently embarked on an ambitious strategy to capture a slice of the burgeoning Asian market with a stake in Star TV, could challenge the Broken Hill Pty. Co. Ltd. as Australia’s biggest earner when it releases its annual results Wednesday.
Profit forecasts were from $ A950 million ($ 643 million) to $ A1.02 billion ($ 691 million).
“News Corp. is certainly in a good position for growth over the next decade,” said Victor Shvets, media analyst at broker McIntosh Baring in Melbourne.
Anticipating the surge in profit, which would double the $ A501.68 million ($ A339.6 million) earned last year, local and foreign investors have rallied the media giant’s shares by a hefty 148% since January to around $ A9.30 ($ 6.30) on Monday.
An earnings recovery at British Sky Broadcasting, the British satellite television channel, lower interest expenses and improved newspaper and television profits are fueling profit growth in Murdoch’s media empire, analysts said.
“It’s clearly BSkyB and the cyclical operations that are behind the rise in profit,” Shvets said.
Lachlan Drummond, media analyst at CS First Boston Australia, said he expected News Corp. to report a profit of slightly above $ A1 billion, or around 53 cents a share.
He said reduced interest costs by around $ A200 million ($ 135.4 million) will help bolster the bottom line and noted that the stock price, which soared 3 % last week, has not yet peaked.
“I’m waiting to see the balance sheet before reaching a final conclusion on a (stock price) target, but I still think the stock has room to go higher,” he said.
Analysts are focusing on the long-term implications of Murdoch’s latest foray into Asia with News Corp.’s $ 525 million purchase of a 63.6% stake in HutchVision Ltd., parent of Star TV, from Hutchison Whampos Ltd. in late July.
The analysts said the purchase could potentially double News Corp.’s current equity base over the next decade, although Star is not seen making a substantial profit for at least two years.
The two-year-old Star TV operates on the Asia Sat-1 satellite, which spans a region of some three billion people from Japan to Egypt. News Corp. has estimated Star TV’s current audience at 45 million people in 11.3 million households.
News Corp., which is 38% held by Murdoch, is trying to open up its entertainment holdings, which include Fox Broadcasting Co. and 20th Century Fox Film Corp., to non-U.S. markets such as Asia as a long-term global strategy, analysts said.
They added that the company’s recent purchase of a 15% stake in Australia’s Seven Network Ltd. also fits into a long-term strategy to expand existing markets.
News Corp. is expected to release a final dividend of 1.5 cents following a three-for-one bonus issue earlier this year, which the analysts said would bring the total dividend to 12 cents from 10 cents last year.
News Corp. controls up to 60% of the Australian press and 40% of the British press. It nearly crumbled under about $ A10 billion in bank debts in 1990.
If the 1992-93 results meet expectations of around $ A1 billion, News Corp. would be close to challenging BHP as the country’s biggest profit earner. BHP reported a 1992-93 profit of $ A1.19 billion for the year to May 31.