TSX Commentary

Corus Entertainment Inc. (CJR.B) – $19.59 – Q1/10 Results Reaffirm a Gradual Advertising Recovery is Under Way
Sector Perform, Average Risk, Price Target: $22.00
RBC CM made a number of changes to its forecast to reflect: (i) slightly higher revenue growth assumptions for radio in H2/10; (ii) slightly higher expense growth assumptions for television; (iii) higher interest expenses in F2011E; and (iv) higher depreciation expenses following the move to Corus Quay. RBC CM raised its F2010E and F2011E EBITDA estimates change from $261MM and $262MM, respectively, to $258MM and $265MM. Sequential YoY improvement in Q1/10 for radio advertising (declining -6%
YoY versus -12% in Q4/09) and specialty television advertising (flat YoY versus -10% in Q4/09) re-affirms that a gradual recovery in advertising spending is under way in Canada. RBC CM believes the company remains on track to meet its previous F2010 EBITDA guidance of $255MM – $270MM (versus our estimate of $258MM and $252MM in F2009) despite absorbing $4MM in Part II fees in F2010. Although television is relatively predictable, visibility is still limited on the magnitude of the recovery in radio advertising in H2/10 and F2011. RBC CM’s current forecast and $22 target price factors in a gradual recovery scenario, which assumes an improvement in radio revenue growth from -10% in F2009 to -2% in F2010E and +3% in F2011E.