Eley Griffiths on STW Communications (SGN)

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How long have you held the stock?

We first started buying STW Communications (ASX Code SGN) in February 2013. It has been well over 10 years since we last owned this stock.

What do you like about it?

Well it appears that their disappointing decade is now likely behind them. The stock had been a perennial underperformer – losing 30% over the 10 years to February 2013 versus the Small Ordinaries Index, which added 66% in the same time frame (both stock and index excluding dividends).

During this period, the company has put together a diversified media and advertising group and in the process looks to have arrested the return on equity compression that has plagued the group for much of this time. The company correctly foresaw the need to grow outside traditional advertising activities. On a 12 times 2013 PER and offering a 5% fully-franked yield, it is a reasonably priced counter, offering discretionary expenditure exposure – a theme that we, as a group, have been targeting.

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