News Corporation Hit by Multiple Sniper Shots but Benefits of Cost Restructuring Emerging

News Corporation's third-quarter fiscal 2016 result was disappointing, with normalised EBITDA down 6% to USD 168 million. The statutory result was worse as it included a USD 280 million pretax charge to settle a legacy lawsuit, resulting in a loss of USD 149 million. Excluding the lawsuit charge gives rise to a normalised net profit after tax, or NPAT, of USD 32 million, up 14%. Despite the poor headline numbers, there was enough silver lining for us to maintain our positive view on News, with the stock trading at an 18% discount to our USD 17 fair value estimate (AUD 23 per share, down from AUD 24 due to currency movement). There is no change to our no-moat and high uncertainty ratings, reflecting the cyclicality of the advertising industry and the structural challenges facing the print media assets.