Buy Primedia (NYSE-PRM at $4.49

Primedia Inc. (NYSE-PRM)Valuation-$8.04
Price May 6, 2011-$4.49
Dividend Yield—6.20%

Another NY Stock Exchange listed stock for us. This makes two in a row.
Primedia’s revenues have been in a decline over the past few years. From $304 million in 2008 to $232 million in 2010. But their operating income has stayed about $40 million in 2010 and 2008. They also reduced their debt by $65 million since December 31, 2008.

While PRM’s stock price is 56% of our valuation and net-cash is negative $4.46 per share (about $207 million in total debt), their huge cash flows have allowed them to pay down the $65 million of debt over the last 2 years while also paying out about $12 million of dividends.

The “topper” on this is that in January, 2011 they announced they had engaged an investment banker to help them explore strategic alternatives. This along with changes to management severance agreements, implementing retention agreements for the same, and the fact that KKR owns more than 50% of PRM, make us expect to collect 6% dividends until this is sold-hopefully for $7 a share or more.
Average trading volume is about 69,000 shares a day.

About Primedia PRIMEDIA helps millions of consumers nationwide find apartments, houses for rent or new homes for sale through its innovative Internet, mobile and print solutions. From publishing its flagship advertising-supported Apartment Guide since 1975 to launching industry-leading online real estate destinations such as ApartmentGuide.com, NewHomeGuide.com and Rentals.com, PRIMEDIA continues to simplify the consumer home search and drive leads that result in occupancy for property management companies, landlords, new home builders and real estate professionals.

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