(46 PLN, -1,06%) management reiterated its cautious stance on print media advertising prospects, saying that it forecasts for 3% growth in 2007, below the overall advertising spending growth, forecasted at 10%. In addition, it cited a statement from PolskaPresse management board, stating that they are fully committed to launching their new national newspaper, based on existing local titles, in October 2007.
Our view: We expect a negative market reaction today, following the stock’s 7% leap yesterday. The outstandingly good results of in 2Q07 seem unlikely to be repeated in 2H07, considering the outlook for increased rivalry from PolskaPresse paper launch, whose marketing budget is rumored to be comparable in size to that of ‘Dziennik’ last year. We still believe that this project lacks key elements of its business rationale (lack of local presence in half of Poland, including Warsaw, large cannibalization risk) and chances for its failure are significant. Thus, despite of outstandingly good 2Q07 results, we leave unchanged our earnings estimates for , as the increasing likelihood of the company boosting its marketing budget, in order to fend off another rival, prevents us from raising them