加拿大皇家银行--加拿大印刷与出版行业研究报告2007年1月

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Printing and Publishing Industry
Initiating Coverage – Grinding It Out
Investment Thesis
We are initiating coverage of four companies in the Canadian printing and publishing sector:
Transcontinental (Outperform, Average Risk; $25.00 target), Quebecor Inc. (Outperform,
Average Risk; $45.00 target), Torstar (Sector Perform, Average Risk; $22.00 target) and
Quebecor World (Underperform, Above Average Risk; US$12.50 target). We maintain our
current recommendations on Yellow Pages (Outperform, Average Risk; $14.50 target) and
CanWest MediaWorks Income Fund (Sector Perform, Average Risk; $7.50 target).
Our recommendations for 2007 consider three investment themes: (i) a waning Canadian
dollar headwind should breathe new life into the sector; (ii) industry revenues are stable but
growth headwinds will persist; and (iii) although valuations are reasonable, valuation risk is
increasing. Against this backdrop, our investment thesis in the sector is two fold: (1) the
economic slowdown in North America warrants a defensive bias; and (2) better to own the
transformation story rather than the turnaround story.
Highlights
• Waning Canadian dollar headwind should breathe new life into the sector – Since
reaching a high of $1.10 in May 2006, the Canadian dollar has fallen 6.4% against the U.S.
dollar. Although hedging programs will dampen the near-term positive impact, a waning
Canadian dollar headwind should breathe new life into the sector.
• Valuations are reasonable but valuation risk is increasing – Current valuation multiples
for the group look reasonable compared to historical levels. However, we believe the
market is pricing in neither an economic slowdown scenario in 2007 nor a deteriorating
secular trend, which warrants investor caution in our view.
• Industry revenues stable but growth headwinds persist – Throughout the current
advertising cycle, flat to +1.0% average annual revenue growth for printers and newspaper
publishers has significantly lagged that of other media. In light of the current economic
slowdown in North America and the underlying negative secular trends, we believe printers
and newspaper publishers will continue to face revenue headwinds in 2007.
• Economic slowdown warrants a defensive bias – We recommend the high-quality,
defensive names with exposure to (1) recurring revenue streams; and (2) media segments
that are less impacted by audience fragmentation, such as cable and directory publishing.
• Better to own the transformation story rather than the turnaround story – Our
concern is that a more negative secular trend is emerging, given the flat to low single-digit
revenue growth for printers and newspaper publishers against the backdrop of a very robust
advertising cycle.
• Quebecor Inc.’s cable exposure stands out in the group – Our positive view on
Quebecor Inc. reflects the high-growth, defensive nature of the company’s cable assets. We
see three factors supporting a lower discount to NAV: (1) Vidéotron should remain a high
growth driver; (2) a declining “old media” contribution improves Quebecor’s growth and
risk profile; and (3) there is potential for value-creating events in the medium term, such as
the sale of Quebecor World.
• Transcontinental a solid outperformer despite difficult industry conditions – We
believe the negative foreign currency impact has masked the company’s underlying
earnings power. We see four catalysts for the stock: (1) management’s long-standing focus
on efficiency will pay dividends; (2) asset diversification should improve the company’s
growth and risk profile; (3) the Canadian dollar headwind over the past five years should
begin to wane; and (4) the company’s strong relative performance warrants a premium
multiple.

Table of Contents
Investment Recommendations.......................................................................................................3
Investment Thesis ...........................................................................................................................3
1. Economic Slowdown Warrants Defensive Bias............................................................................3
2. Better to Own the Transformation Story Rather than the Turnaround Story ................................4
Investment Themes.........................................................................................................................5
1. Waning Canadian Dollar Headwind to Breathe Life into Sector ..................................................5
2. Industry Revenues Are Stable but Growth Headwinds Persist .....................................................6
3. Reasonable Valuations but Valuation Risk Is Increasing .............................................................7
Company Profiles:
Torstar Corporation..........................................................................................................................9
Transcontinental.............................................................................................................................18
Quebecor World.............................................................................................................................26
Quebecor Inc..................................................................................................................................35
Appendix I: Printing Industry Overview....................................................................................44
A Highly Fragmented Industry .......................................................................................................44
U.S. Print Volumes Stabilize ..........................................................................................................45
Print Capacity Utilization Rebounds...............................................................................................46
Pricing Pressure Eases ....................................................................................................................47
Ongoing Migration from Print to Digital Media.............................................................................48
Appendix II: Newspaper Publishing Industry Overview ..........................................................49
A Mature and Concentrated Industry..............................................................................................49
Positive but Modest Low Single-Digit Revenue Growth................................................................49
Daily Newspapers Losing Market Share of Advertising Dollars....................................................50
Dichotomy Between Daily and Community Newspapers...............................................................50
Newspapers Predominantly a Local Medium .................................................................................51
Negative Linage Trends Despite a Healthy Economy Worrisome .................................................51
Cost-Cutting an Ongoing Reality....................................................................................................52
EBITDA Margins Coming Under Pressure ....................................................................................53
Appendix III: Summary of Comparable Valuations .................................................................54
Appendix IV: Other Companies Mentioned...............................................................................56
CanWest MediaWorks Income Fund..............................................................................................56
Yellow Pages Income Fund ............................................................................................................56
Required Disclosures ....................................................................................................................57
Explanation of RBC Capital Markets Rating System .....................................................................57
Distribution of Ratings, Firmwide ..................................................................................................57
Analyst Certification......................................................................................................................58
Dissemination of Research .............................................................................................................58
Conflicts Disclosures ......................................................................................................................58
Important Disclosures .....................................................................................................................58
Additional Disclosures....................................................................................................................60

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