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Soaring Murdoch shares tipped to rise higher

SYDNEY: The Australian-listed shares of Rupert Murdoch's New Corp. could make even bigger gains in the months ahead despite more than doubling in value since mid-October, analysts believe.

A meteoric rise to Friday's closing price of 20.88 dollars has also brought the media giant close to challenging Australia's largest company, Telstra Corp. Ltd., in terms of implied market value.

Gaining 45 percent since the announcement of the America Online-Time Warner merger in January, News Corp.'s market capitalisation has soared to almost 85 billion dollars, within striking distance of Telstra's market value of around 95 billion dollars.

Just four months ago, News Corp was worth less than half of the telecom giant.

News Corp. shares have benefitted from analyst re-ratings, and merger and spin-off speculation. But investment analysts say the latest surge is not without justification.

This week's 23 percent rise was sparked by an extremely bullish investment report by Merrill Lynch, which raised its 12-month price objective for News Corp. Shares to 23 dollars from 17.75 dollars, and hiked its 12-18 month objective by 70 percent to 26-28 dollars.

"We strongly believe that News Corp. has only begun the process of unlocking its significant hidden and unrecognised asset value," enthused Merrill Lynch's Jessica Reif Cohen.

"We believe several assets could be IPO's over the next year or so, which, in our opinion, would dramatically force shares higher."

Cohen's list of possible News Corp. spin-offs includes the fully-owned Star TV, control of BSkYB, Sky Latin America, and the 25 percent owned FoxTel.

The re-rating caused a rush by local institutions in Australia to cover underweight positions in the stock.

Although news of the AOL-Time Warner merger in January ignited a 4.00 dollars surge in News Corp. stock in Sydney, analysts doubt that News Corp. would godown the same path and focus instead on the potential of the group's individual assets.

Bill Bannister, media analyst at Det Tolhurst, pointed to a significant shift in the mindset of investors towards the opportunities that would arise from converting News Corp.'s worldwide satellite pay television assets into bundled service providers.

Broadening the revenue streams of the pay TV operations to include telephony and other services would virtually treble the potential revenues from the businesses, he said.

Bannister said that BSkYB was paving the way in the British market and that the experience could be repeated by FoxTel, Star TV and 10 other News Corp. units around the world, particularly now the company was signalling a readiness to free up its asset base.

Analysts also note that News Corp.'s name has recently been linked with major companies such as France's Vivendi, Finland's Nokia and Internet player Yahoo.

Based on current year earnings, News Corp. shares may now stand at a sharp premium to the market, but the company's "feast of opportunities" has meant it is getting a substantially higher rating compared to other mainstream media companies, another analyst said.

Analysts said they expected the shares to consolidate around the 20 dollar mark in the short term before moving towards 30 dollars over the next 12 months.

Meanwhile, consensus expectations for News Corp.'s second quarter net earnings, to be announced next week, are put at around 750-800 million dollars.

While that would be down from a year earlier, it would be enough to justify an upward revision in profit forecasts for the year, Bannister said.ÑAFP