By: Mark Fitzgerald
Wachovia Securities initiated its coverage of GateHouse Media with a “Market Perform” rating for the community newspaper publisher, citing its “unique” high dividend, small-market focus, and room to grow in Internet revenues as favorable factors.
In a note to investors by analyst John Janedis, Wachovia said it expected GateHouse, which went public in late October, to generate strong free cash flow. It called its 6.1% dividend yield “attractive,” and “unique in the sector.”
Wachovia also expects GateHouse, which has made newspaper buys totaling $90 million since going public, to continue its acquisitiveness.
The brokerage said GateHouse’s focus on local advertising — which generates 63% of its revenues compared to the industry average of 46% — positions the chain better than metro-heavy peers.
“However, given the stock’s performance post IPO (initial public offering) and current valuation, we are initiating coverage with a Market Perform rating on the shares,” Wachovia said. On its first day of trading on the New York Stock Exchange, GateHouse shares went from the IPO pricing of $18 to 21.16. It has since drifted down, and traded at $20.46 at 1:11 p.m. EST Tuesday.
Goldman, Sachs initiated its coverage of GateHouse Monday with a “Buy” rating.