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Why investors like this small media stock

Glacier Media's trade publications include the Daily Oil Bulletin

Andrew Brien/Glacier Media

Shares in newspaper and magazine publisher Glacier Media Inc. are picking up after some recent analyst upgrades, but there's still caution given "unrelenting secular challenges" in the industry.

Glacier publishes a wide range of newspapers and trade publications, including the Times Colonist in Victoria, the Daily Oil Bulletin and the Northern Miner. It also has a business information segment that produces technical manuals and medical education programs.

The small-cap stock has increased about 10 per cent over the past three trading sessions and analysts see more room to rise as the Vancouver-based company vows to keep slashing costs and selling assets to improve its financial position as part of a "value enhancement" initiative announced last fall to save $7-million annually.

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The company recently sold a property in Saskatoon for $8.2-million and decided to lease it back from the new owners. In January, it shut down the Kamloops Daily News in Kamloops, B.C., saying the 80-year-old newspaper was no longer viable. It's also growing its trade and business information areas, which now comprise almost 60 per cent of earnings before interest, taxes, depreciation and amortization, the company said.

"We have a strong position in business information in Canada … particularly in the natural resources markets – agriculture, energy and mining," chief executive Jon Kennedy said in an interview. "It's not well understood how much the business is represented by those, and the value of those businesses."

Some analysts are taking comfort in Glacier's strategy, in particular the cost-cutting moves, as well as the company's better-than-expected increase in fourth-quarter earnings and revenue.

"We believe the company is making decent progress on a number of fronts including revenue stabilization, cost control and deleveraging," RBC Dominion Securities analysts Haran Posner and Drew McReynolds said in a recent note, while upgrading their recommendation to "buy" and increasing their price target to $2 from $1.75.

Canaccord Genuity analyst Aravinda Galappatthige also upgraded Glacier to "buy" in recent days and increased his price target to $1.80, citing the various moves being made to bolster the business, including asset sales to repay debt.

"We believe this makes a lot of sense as one of the key priorities of the company," he said in a note.

The price-target hikes by analysts also come just days after investment manager Fairfax Financial Holdings Ltd. said on March 20 that it was increasing its stake in media company Torstar Corp., shares of which have since climbed about 20 per cent.

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Still, investors continue to question investments in newspaper and magazine companies, many of which are losing money amid a decline in print revenue, as readers increasingly get their news online or on their mobile phones.

"The print advertising sector faces unrelenting secular challenges and prolonged weakness. In short, there appears to be no relief in sight to these challenges," BMO Nesbitt Burns analyst Tim Casey said in a recent note. He has a "hold" on Glacier and a $1.60 price target.

Analysts are now split on the outlook for Glacier, with three recommending it as a "buy" and three a "hold," according to S&P Capital IQ. The consensus 12-month target price is $1.80, which is still below its 52-week high of $1.89 reached a year ago.

The shares closed up 4.4 per cent to $1.41 on the Toronto Stock Exchange on Tuesday.

National Bank Financial analyst Adam Shine lowered his price target last week to $1.50, which he said reflects a potential future tax liability.

He kept his "sector perform" rating on the stock.

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"We're hesitant about upgrading at this time due to ongoing uncertainty associated with the likelihood … of a possible tax reassessment," Mr. Shine said in a note late last year.

In March, 2013, Glacier said the Canada Revenue Agency issued a reassessment notice for one of its affiliates related to the use of non-capital losses in the 2008 to 2011 tax years. The company has said that it believes it reported the taxes correctly.

RBC analysts believe the "lingering uncertainty" about the potential reassessment is priced into the stock.

Robert Sneddon, president and founder of portfolio management firm CastleMoore Inc., said Glacier is doing a good job of containing costs, but that he doesn't plan on buying the stock because of its focus in the print publication business.

"From the equity side, it could get a little bit better, but that doesn't change that model, which is tough to begin with," he said.

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