Sydney, Mar 12: Now a favourite of US investors, global media group News Corp Ltd soared to close above A$10 per share for the first time on Thursday.Shares in the company, which is controlled by Australian born and US-based Rupert Murdoch, ended 20 cents, or 2.0 per cent, higher at A$10.15 with 8.21 million shares changing hands.
Brokers and analysts said positive US sentiment has fuelled gains this week, adding to earlier gains led by the huge successful of the Titanic film in US box offices and more solid profit results. Reasons for the rise were scattergun, although talk of early redemption of its long-term convertible bonds and cheer over its Fox TV unit in the United States achieving higher ratings featured heavily.
"With News Corp, it tends to be a lot of bits of bullish news that make people comfortable with the stock overall," said Mick Coombes, a director of Macquarie Equities.
Just after Thursday's open, the shares shot 6.5 per cent to a record A$10.60, nearly double a recent trough of A$5.63 touched on May 15 last year when many analysts feared Titanic would be a disaster for the company and profits did not meet expectations.
On Wednesday, it climbed 30 cents, or 3.1 per cent, to A$9.95 but analysts said the blue chip had become over-priced long before it approached A$10."It has exceeded our idea of fair value by a long way," said an analyst, who asked not to be named.
"That's why we have a sell recommendation on it."
Another analyst said it was fair value at A$9.04: "Let's face it, the company's overvalued, but that's okay. Companies get overvalued all the time, and they can stay overvalued for a long time. It doesn't mean it's going to head South straight away."
Another analyst said it was fair value at A$9.30 to A$9.40.
However, one senior broker said his firm had valued News Corp at A$10.80. "The market is in the process re-rating News Corp," he said.
"Its fundamentals are all improving."
Analysts said consistent ratings improvement by Fox TV carried enormous weight on Wall Street.
"The thing that drives this stock is the TV ratings in the US, and I heard the Fox rating was very very good," an analyst at a US-based securities house said.
According to the latest Nielsen figures for the week to March 8, Fox had a 7.9 rating and a 13 audience share, up from 7.2 and 11 less than a month earlier in the week to February 15.
"Thirteen is a big (successful) week for Fox," an analyst at an Australia-based brokerage said.
Each rating point equals about 980,000 households or 1.0 per cent of the estimated 98 million TV households in the US audience share is the percentage of in-use TV sets tuned to a given programme.
Brokers said the film Titanic, by the Fox Films division, continued to spur positive sentiment and rake in cash.
"It continues to pull in mind-blowing amounts of money, so certainly that's helping," Macquarie's Coombes said.
The blockbuster film is the first ever to gross more than $1 billion worldwide.
Some brokers said speculation about the redemption of News' liquid yield option notes (LYONS), a type of long-term convertible bond, had left investors short of stock.
One said a number of LYONS holders were hedge funds, which have long note positions and are short of News Corp shares.
"They'll be long the notes and short shares. If they suspect the company might call back those notes in cash, they'll end up with a long cash and short shares position, and they'll be covering some of those shorts," he said.
Some analysts suggested market relief over any potential threat to News interests in China following a settlement by its publishing arm HarperCollins with former Hong Kong governor Chris Patten. The publisher abandoned a book deal with Patten.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
