Rogers Communication and Shaw Communications: Canada's Media Moguls
New York (The Street)--
(RCI) is not setting the investment world on fire. In fact at the moment it elicits more yawns than hyperbole. That okay by me because that's what often makes for a good buying opportunity--and I'm always scouring the planet for that!
Canadian companies aren't getting much respect these days either. As the Canadian dollar (aka "The Loonie") recently fell to almost a 4-year low against the dollar, many investors shy away from companies that have exposure to such currency exchange issues. Since September 19th the Loonie has sunk 5%, making Canadian exports cheaper but hurting Canadian-based importers who rely upon a number of American goods and services.
This has helped make Rogers, which operates as a communications and media company in Canada, an attractively-priced longer term value investment. I repeat, if you're a value investor who likes to get the most bang for their buck, RCI is trading at a current and forward (1-year) PE ratio of only 12. This is one of the reasons Jim Cramer has made RCI and its Canadian "cousin", Shaw Communications (SJR), as Jim stated, "... these two Canadian media giants would make an excellent addition to a well-diversified portfolio."
To see a comparative chart of these two companies certainly indicates that both companies have corrected from their 52-week highs. In fact RCI went from being up around 13% for 2013 to now being down around 3%. Shaw has done somewhat better. SJR went from being up 10% for the year to being up less than 2% as of the close on Thursday, December 5th.
Both companies pay a marvelous dividend. Rogers has a current yield-to-price of nearly 3.74% and Shaw sports an even higher yield of 4.15%. Roger's empire makes my mouth water when I dig deeply into what it controls and the revenues it can generate.
RCI's wireless division offers voice and high-speed data services, as well mobile devices and accessories. It markets its products and services under the Rogers, Fido, and Chatr brands. Its cable segment offers cable television, high-speed Internet access, and cable telephony services.
As of December 31, 2012, the cable segment had 2.2 million television subscribers and 1.9 million high-speed Internet subscribers, as well as provided home phone services to approximately 1.1 million customers. It also offers a digital video, including a range of television programming and features, such as HDTV plus Internet services with multiple tiers of high-speed broadband. This division provides its products through stores and e-business Websites.
The companys Business Solutions division provides wired telephony, data networking, and Internet protocol (IP) services for Canadian businesses and governments, as well as to other telecommunications providers on a wholesale basis. This lucrative segment offers voice, data, IP, and ethernet solutions to small, medium, and large businesses; governments and financial institutions, as well as provides a multi-service suite of services using high speed fiber,cable,and wireless network.
Then there's the RCI media segment which might be potentially the most profitable division in the years ahead. It offers television and radio broadcasting, televised shopping, sports entertainment, publishing, and digital media. It operates 55 radio stations across Canada and various television properties, including the City network, 5 multicultural OMNI stations, Sportsnet, specialty sports television services, and various other specialty channels, nationally televised shopping service, The Shopping Channel, and the Toronto Blue Jays Baseball Club.
The Rogers Centre, a sports and entertainment facility is part of this treasure trove of holdings plus it owns approximately 50 consumer magazines, plus trade and professional publications. The company was founded in 1920 and is headquartered in Toronto, Canada.
RCI has a market cap of about $22.8 billion and as of the end of the third quarter (September 30, 2013) it had trailing twelve month (TTM) revenue of nearly $13 billion and operating cash flow (TTM) of $3.65 billion.
Shaw Communications has a very similar profile which you can learn all about by visiting its user-friend website. It describes itself as follows: "Shaw Communications Inc. is a diversified communications and media company, providing consumers with broadband cable television, High-Speed Internet, Home Phone, telecommunications services (through Shaw Business), satellite direct-to-home services (through Shaw Direct) and engaging programming content (through Shaw Media).
"Shaw serves 3.3 million customers, through a reliable and extensive fibre network. Shaw Media operates one of the largest conventional television networks in Canada, Global Television, and 18 specialty networks including HGTV Canada, Food Network Canada, History and Showcase." As of the end of August, 2013, SJR had a market cap of around $10.6 billion and TTM revenue of about $5.24 billion. It's TTM operating cash flow was a sizeable $1.4 billion.
Investors interested in these two companies will continue to be impacted by the currency conundrum as well as the economic conditions in Canada. I'm betting both will turn in a more favorable direction during 2014, but in case they don't, use a trailing stop loss and may I recommend you buy half now and half later.
At the time of publication the author had a position in RCI but none in any of the other stock mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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