INITIATING COVERAGE REPORT

William C. Dunkelberg Owl Fund April, 6th 2015

Victor Fallas: Lead Analyst vfallas@theowlfund.com Mike Soforic: Associate Analyst msoforic@theowlfund.com Maria Villamar: Associate Analyst mvillamar@theowlfund.com

COMPANY OVERVIEW

Twenty-First Century Fox, Inc., formerly News

Corporation, is a diversified global media and

entertainment company that produces which creates

television programs and movies; broadcast television.

The Company operates five industry segments: Cable

Network Programming (39% of FY 2014 sales);

Television (17% of FY 2014 sales); Filmed Entertainment

(30% of FY 2014 sales); Direct Broadcast Satellite

Television (19%), and Corporate and Eliminations (-4%

of FY 2014 sales). As of FY 2014, Twenty-First Century

Fox operates internationally in the regions United States

(55% of FY 2014 sales), Europe (31% of FY 2014 sale)

Asia (7%), and Canada (1%) and other miscellaneous

regions (7%).

INVESTMENT THESIS

21st Century Fox (FOXA) is currently trading at a 17.3%

discount to its 3-year P/E spread against its main

competitors: Walt Disney (DIS), CBS Corp (CBS) and

Time Warner (TWX). FOX became undervalued due to

(1) the market reacting to losing out on its bid for rival

TWX, (2) Management reducing its FY 2015 guidance

due to adverse foreign exchange and lower ad revenues

which other competitors also experienced (3) A dispute

with Dish over fees for Fox News which has since been

resolved. Fox holds wide economic moats of scale and

leverage over broadcasters which allows it to increase its

affiliate and retransmission fees. Moving forward, we see

FOXs strong international presence, margin expansion

through its DBS business divestiture, RSN and channel

leverage, and the FCC regulation auction will drive FOX

to return to trading at its historical multiple to

competitors. These catalysts give FOX a 3-year earnings

growth at a faster pace than competitors; we see the

recent lower guidance and other one-time events as a

buying opportunity for a strong industry leader. We

believe that FOX will trade at its 3 year historical P/E

spread multiple of 21.0x, and will trade at our discounted

cash flow valuation of $40.80, yielding a 23.7% return.

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Twenty-First Century Fox Inc. Exchange: NYSE Ticker: FOXA Target Price: $40.80

Sector Outperform Recommendation: BUY

Key Statistics: Price $34.04 52 Week Low $31.01

Return 23.7% 52 Week High $39.27

Shares O/S (mm) 2.13B Yield 0.90%

Market Cap (mm) $72.37B Enterprise Value

$81.45B

1 Year Price Graph

Earnings History:

Quarters EPS Rev. YoY Price

3Q14 $0.47 11.8% 6.54% 4Q14 $0.42 16.8% 5.04% 1Q15 $0.39 11.7% 4.53% 2Q15 $0.53 -1.3% -5.37%

Earnings Projections:

Year Q1 Q2 Q3 Q4 Total

2014 $0.33 $0.33 $0.47 $0.42 $1.55

2015 $0.39 $0.53 $0.40 $0.40 $1.69

2016e $0.45 $0.51 $0.54 $0.54 $2.03

2017e $0.56 $0.63 $0.63 $0.64 $2.50

All prices current at end of previous trading sessions from date of report. Data is sourced from local exchanges via CapIQ, Bloomberg and other vendors. The William C. Dunkelberg Owl fund does and seeks to do business with companies covered in its research reports.

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CATALYSTS

International Expansions:

FOX has made significant investments in

developing pay-television in international markets as

it seeks to expand its place as a leader in key pay TV

growth regions. Continued emphasis on gaining

international market share will drive top line for

FOX and remain the market leader in pay TV. Fox

operates on more than 300 channels in 200

countries reaching 1.4 billion households. Primary

networks are located in Latin America (LAPTV:

acquired in 2013), India (#1 network SKY India

and 2014 acquisition of Asianet Communications

Limited) and Europe, Africa, and Asia. The

company has been purchasing major stakes in large

international pay-television broadcasters such as

Fox Pan American Sports LLC (Latin America)

STAR India, Fox Sports Asia and many more. In total FOX derives 45% of FY 2014 revenue from countries outside

the United States. Our competitors receive, Disney (25%), CBS (13%), and Time Warner (31%), all possess significantly

lower foreign exposure. We believe this gives FOX an advantage as televisions becomes more common in emerging

markets. Currently the international pay-television penetration remains below 50% in globally versus the US pay-

television penetration around 90%. Looking forward we believe that FOX will continue to expand in international

markets is in the best position to capture the growing international pay-television market. In addition, FOX is still ahead

of many of its peers in expanding its cable networks in Asia and Europe and it has the financial resources to further

expand over the next decade.

Selling of Direct Broadcast Satellite Television Business:

In Mid-2014, FOX sold its pay-tv business in Italy and Germany to British Sky Broadcasting Group (BskyB) for more

than $9 Billion. Despite this, FOXA will still hold a 39% stake in BskyB, regardless of the low margins this business

brought for FOX, which had grown revenues at average annual rates of less than 2% up to 2012. EBITDA margins for

the segment had been declining (19% in 2008 vs. 9% in 2013) and 50% of FOXs capital expenditures were associated

with this segment in the last four years. FOXs EBITDA margins are expanding 210 basis points in FY 2016 which can

largely be attributed to selling the segment. Net Income margins are also expanding 100 basis points in the same time

frame. This sale frees up cash for FOX which management stated they will increase its buyback program and dividends

but was also done in pursuit of Time Warner. After missing out on that acquisition, the recent (4/3/15) announcement

of Madison Square Gardens (MSG) dividing its live sports and entertainment into two companies. MSG holds two

RSNs in the countrys top media market which would complement FOXs holding of the YES network (NY Yankees)

and 22 RSNS. Although this was only announced on April 3rd, the consumer sector sees this as likely target for FOX

with its extra capital from the sell-off.

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Leverage over Programming:

21st Century Fox possess one the strongest

portfolios of television networks. Most

prominent networks include FOX News (96

million U.S. households), Fox Sports Net (91

million subscribers), and FX (100 million U.S.

households). Due to the popularity of these

channels, FOX has been able to increase

affiliate fees year after year. Entertainment

producers receive affiliate fees from multi-

channel video programming distributors based

on the number of their subscribers, simply, the

more a channels are watched, the higher

companies like DirecTV will pay FOX for the

right to use its networks and content. FOX

can leverage its position into earning higher

affiliate fees over the next several years as channels such as FOX News, FSN, and FX are considered essential

channels in television broadcasters channel bundles. Moreover we forecast that, as FOX enters more sport and news

oriented networks, advertising fees will increase. Even though companies such as Netflix, Hulu, and Amazon Prime

Instant Video, have moved viewers to watch drama television shows on streaming applications, viewers still and will

continue to watch news and sports programming in real time, which is a trend that adds advertisers value. FOX

remains the industry leader in both news and sports networks. Fox News is a top-10 watched cable channel and FSN

and Fox Sports 1 have contracts with professional sports leagues such as the NFL, MLB, NASCAR, UFC, along with

collegiate football and basketball teams. Fox also has 22 regional sports networks that gives FOX power to negotiate

higher affiliate fees and advertisements. Fox has long-term deals with over 50 teams and we believe that the prominence

of FOXs news and sports networks will drive top line for FOX.

Expected 2016 FCC Regulation Auction:

In FY 2016, the Federal Communications Commission intends to repurchase spectrum stations from broadcasters and

auctioning the acquired stations to top tier telecom companies. Major broadcasters (CBS, Comcast, Fox) would be

approached to sell their high frequency MHz stations. FOX presently has twenty-nine broadcasting stations in seventeen

domestic cities of which management

believes 18 would be available to be

auctioned. Out of these seventeen cities,

eleven cities have more than one

broadcasting station which leads to cross

coverage and cannibalization. The FCC

auction will provide FOX the opportunity

to divest some of their stations and reduce

the cannibalization. Moreover, in previous

auction, the FCC has paid a premium for

stations which FOX would be

compensated. FOX has a great

opportunity to sell, and share its station to

expand margins, increase its shareholder

returns and gain cash as well as investing

in its international growth strategies.

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INDUSTRY OVERVIEW

- Media & Entertainment Industry

The overall trend for digital streaming has made many of the major media &

entertainment companies look to diversify in several revenue channels. New

consumers options for access to electronic media and entertainment, pose a

threat to the traditional cable bundle of the past which largely affects any

networks that lack the must have programming operations style. Many

analysts believe that the overall content demand globally is growing at a record

pace; more buyers than ever create a favorable environment for the strong

leaders in the industry. The best positioned companies are the larger media

companies with notable scale, leverage and content ownership that will continue

to meet the demand of the end consumer. Companies such as DIS, FOX &

CBS have a strong offering of both, sports and entertainment products in large

scales which will allow them to leverage higher fees to meet the growing

demand.

- Broadcast Retransmission Fees

Broadcast networks such as FOX and Disneys ABC are looking to raise

retransmission fees from Pay-TV operators in order to reduce their reliance on

advertising revenues moving forward. Analyst see retransmission fees rising

21% in 2015, and could increase 90% to $9.3 Billion in 2020 (was $4.9 B in

2014). Networks are looking to increase fees with Pay-TV distributors and

Station Affiliates to match the growth of sports rights. CBS has set a $2 Billion

in annual transmission revenue by 2020.

- Future Streaming Services

Apple plans to launch a streaming TV service in late 2015, which will include big

networks such as ABC, CBS and FOX among its 25 channels. Smaller networks

may be excluded from this service and this looks to be the same with other

future streaming TV services as Pay-TV looks to be consolidating. These smaller

networks may look to be acquired by other network owners in M&A in order to

gain leverage. Google and Sony may also seek to get into developing online Pay-

TV services as well.

- TV Advertising

Global TV advertising revenue is successfully responding to the rise of newer

forms of digital media. Global TV advertising revenue will grow at a CAGR of

5.5% over the next five years, confirming TV as the place to be for advertisers

looking to reach big audiences. Online TV advertising for traditional

broadcasters will double to 4.5% of total advertising for the major media

companies by 2018. This presents a large opportunity for significant new

revenue stream despite the competition from new entrants.

- Subscription TV

Global subscription TV revenues will grow at a CAGR of 3.5% over the next

five years to US $236 Billion in 2018. This growth demonstrates that

subscription TV is in a healthy position, assisted by the initiatives it has

implemented to counter the impact of OTT and other disruptive influences. A

major opportunity is China who will become the 2nd largest TV market in 2016

surpassing the UK and Germany. Smaller emerging markets also present a big

opportunity for growth.

WIDE ECONOMIC MOAT

- Scale and Brand Strength:

FOX remains a leading global

entertainment company that will continue

to capitalize on new content. The cable

network segment holds franchises such as

Fox News which continues to outpace

CNN and MSNBC. FOX is the leader in

RSN in the US with exclusive

broadcasting rights for multiple teams; its

international presence allows the ability to

benefit from emerging markets and its

size and leverage over the market allows it

to remain the most favorable way for

advertisers to reach a large number of

consumers. Moving forward, the demand

for content continues to grow, live sports

remain immune to time-shifted viewing

and targets a key advertising

demographic.

RISKS

-Foreign Currency Translation:

FOX derives 45% of its sales from

countries outside the United States. The

company became undervalued as analysts

became fearful of the companys foreign

exposure as the United States Dollar

appreciated. Looking forward, increased

currency volatility could cause adverse top

and bottom lines for FOX

- Advertising spending/rating:

Advertisers could reduce spending on

major TV networks and instead look to

spend more funds on online advertising

as consumers shift to digital content

viewing on streaming services.

- Slowdown in global consumer

spending: FOX, being a discretionary

entertainment company, is very tied to

macro-economic trends and if consumer

spending slows or stagnates it will lead to

lesser subscription revenues and less

revenues from motion pictures.

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SEGMENT OVERVIEW

Cable Network Programming/Television

Consists of the production and licensing of programming

distributed through cable television systems, direct broadcast

satellite operators and telecommunication companies primarily in

the U.S., Latin America, Europe and Asia. The cable networks

derive a majority of their revenues from monthly affiliate fees

received from multi-channel video programming distributors

(MVPD) (ie. Comcast, Dish, DirectTV, Verizon Fios) based on

their subscribers. Affiliate fees are net of the amortization of the

cable distribution investments (simply the fees paid to MVPD to

facilitate the carriage of a domestic cable network). The company

receives these funds on straight-line basis over the contract

period. The majority of the expenses in the segment are

acquisition and production expenses related to programming. Some of the Cable Network programming include Fox

News, Fox Sports 1, FX, FXX (the fastest growing network in cable) and National Geographic. FSN is the largest

regional Sports Network (RSN) in the U.S. they transmit collegiate home team sports events with 91 million subscribers

surpassing ESPN2 in viewers. FX is also seeing stronger content monetization (and less reliance on advertising) through

growing streaming video on demand.

Filmed Entertainment

Consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in

all formats in all entertainment media worldwide. This segment derives its revenue from the production and distribution

of live-action and animated motion pictures and television series. License fees received for TV exhibition are recorded as

revenue in the period that it was available for exhibition which at time causes fluctuation in operating results. Operating

costs incurred by this segment include exploitation costs, primarily theatrical prints, advertising, home entertainment

marketing and manufacturing costs.

Direct Broadcast Satellite TV

FOX engaged in the broadcast service business directly to subscribers in Italy and Germany and Austria through its

subsidiaries Sky Deutschland and Sky Italia. Fox still holds a 39% interest in BSkyB, the UK and Irelands leading

entertainment and communications provider. This segment was sold during the last reporting period as it required large

amounts of capex spending and although it made up 19% of revenue, it also produced 6% of EBITDA. It earned its

revenue by obtaining the carriage of the companys channels on multi-system operators (MSO).

PEER GROUP IDENTIFICATION

- Disney (NYSE: DIS)

Diversified International Family entertainment operating in media,

parks and resorts, studio entertainment, and consumer products..

- CBS Corporation (NYSE: CBS)

Operates business in the media and entertainment industries

including TV Networks, TV studios, Global distribution and

Films.

- Time Warner Inc. (NYSE: TWX) Media and entertainment company that operates in Networks,

Film, and TV Entertainment and Publishing.

TARGET PRICE

FOX is currently trading at a 17.3% discount to its 3 year historical

premium to Disney, CBS, and Time Warner. We forecasted the next

7 year free cash flow to equity and discounted the FCF to the

companies 7.43% WACC. We calculated a total equity value of

$91,080 billion and when we divided the equity value by shares

outstanding we calculated a 40.80 price target.

Discounted Cash Flow P/E Valuation Price

Target= $40.80

Target Multiple: 22.1x

Current Multiple: 18.5x

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FINANCIALS

Revenue

FOX revenue has grown from $24.2 billion in FY 2011 to

$31.9 billion in FY 2014. FOX derives its revenue from

five avenues within its five segments: affiliate fees (28.2%

of FY 2014 sales), subscriptions (17.2% of FY 2014 sales),

advertisements (25.8% of FY 2014 sales), content (27.0%

of FY 2014 sales) and miscellaneous revenue streams

(1.9%). Over the last year, revenue has increased 15.1%

from $27.7 billion to $31.9 billion. Affiliate fee revenue

increased 17% due to higher average rates per subscriber

and the acquisition of majority interests in the YES

Network (New York Sports Network), Fox Sports Asia

(formerly ESPN Star Sports) and Eredivisie Media & Marketing CV (Premier League Soccer), we see this trend of

expanding into international markets as a major catalyst going forward. Launches of new channels (Fox Sports 1, STAR

Sports networks, FXX drove FY 2014 revenue. Looking forward, we believe revenue will increase at a 5.0%, 7 year

CAGR (analyst consensus). We credit this forecast due to the FOXs emphasis on going in international markets, seen

in the FOX Sports Asia and Eredivisie Media & Marketing CV, as well as their leveraging of affiliate fees and advertising

fees for FOX News, FSN and FX networks.

- Cable Network Programing (38.5% of FY 2014 Revenue)

The Cable Network Programing revenue grew from $8.2 billion in FY 2011 to $12.3 billion in FY 2014, representing a

10.6% CAGR. Within the Cable Network and Programing segment, revenue fluctuates around affiliate fees and

advertising. Over the past fiscal year, the cable network programming segment increased $1.4 billion, from $10.9 billion

to $12.3 billion or 12.8%. Domestic affiliate fees increased 14% due to higher average rates per subscribers as well as

growth of subscribers. Advertising revenues increased 8% due to higher pricing and volume. Internationally, affiliate fee

revenues increased 19% due to local currency growth as a result of higher pricing in Latin America and increase in

subscribers in Latin America and Asia. International advertising revenues increased 9% due to higher volume and FOX

pricing. Looking forward we believe that the international market is very attractive for FOX due to the growth potential

and the company's leveraging of its current and new sport networks as well as FOX News.

- Television (16.6% of FY 2014 Revenue)

The television revenue has grown from $4.8 billion in FY 2011 to $5.3 billion in FY 2014, representing a 2.3% CAGR.

Within the television segment, advertising fees and advertising primarily drive revenue. YoY television revenue increased

9%, from $4.9 billion to $5.3 billion. Advertising revenues increased 5% for FY 2014 due to increased pricing, primarily

in their sport networks. We believe the companys sport networks are immensely valuable assets. FOX has rights to the

NFL, MLB, NASCAR, UFC and 22 Regional Sport Networks. Live sports are the most profitable advertising television

programs for networks as viewers still, and will continue to watch news and sports programming in real time and we see

the FOX continue to grow ad revenue.

- Filmed Entertainment (30.4% of FY 2014 Revenue)

Filmed Entertainment segment has grown revenue from $7.8 billion in FY 2011 to $9.7 billion in FY 2014, representing

a 5.5%. Revenue fluctuates based on sales from motion pictures; YoY sales increased from $8.6 billion to $9.7 billion or

12%. This growth was due to higher worldwide theatrical revenues, an increase in network, syndication revenues and

higher digital distribution revenues from the licensing of television productions. Overall, this segment is dependent on

the popularity of FOX movies and television shows. We believe that the Filmed Entertainment segment is unrealistic to

forecast due to the uncertainty surrounding future popularity of FOX produced television and motion picture

production. That being said, FOX is the second largest filmed entertainment company in the world and has

consecutively improved revenue and we do not see a reason why they would not do so in the future. Therefore, due to

long historic trends we expect conservative revenue growth within our holding period.

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Margins

FOXs gross margin has contracted from 35.0% in FY 2011

to 33.8% in FY 2014. In FY 2014 operating expenses

increased a 21% increases resulting in gross margin

contracting from 36.8% to 33.8%. This increase in

operating expenses occurred as FOX invested additional

operating expenses to in its DBS segment as well as its

initiating costs for the new Fox Sports 1, FXX, and Star

Sports networks. DBS operating expense increased $1.5

billion as the company consolidated Sky Deutschland

beginning in January 2013. The Cable Network

Programming segment for fiscal 2014 was primarily related

to higher programming costs, and the continued

investments in Fox Sports 1, STAR Sports networks and FXX. Lastly, the companys Filmed Entertainment segment

was primarily related to an increase in production and participation costs related to television and motion picture

production. EBITDA margins from FOX were 21.1% in FY 2014. Cable Network Programming, Television, Filmed

Entertainment, and Direct Broad Satellite Television EBITDA Margins were 36%, 16.7%, 14% and 7%, respectively.

Due to the low margin of the Direct Broadcast Satellite Television, the company sold its share to BSkyB for

approximately $9.0 billion. We view the divestiture very favorably as the company can now focus on investing on its

high margin segments. Profit margin for FOX has expanded from 10.0% FY 2011 to 11.3% in FY 2014. Looking

forward in the near term, we are slightly conservative on FOX margin expansion although its divestures and investments

will expand margins in the future. The acquisitions of the majority interest of the international network along with

increased investments in the companys international growth plan and its investments in current program channels will

cause gross revenue to remain consistent with our forecasted sales growth.

Earnings

FOX has consistently surpassed earnings expectations as

they have only missed two out of their last ten earnings

estimates with an average surprise of 8.43% during that

span. The remainder of FY 2015 which are the last two

quarters ending this June are expected to see slowing

growth and is a reason for our undervaluation, as the street

reacted to management lowering guidance. Lower than

expected, advertising revenues were also the cause for the

reaction to earnings although both Viacom Inc. and Walt

Disney Co. reported weaker than expected ad revenue.

FOXs share price fell despite the company surpassing

earnings estimates by double digits as well as surpassing

revenue estimates by 1.18%. FY 2015 EPS is projected to be $1.69 (9% growth over 2014), where 2016 EPS is estimated

at $2.03 (21% growth YoY). Along with adverse foreign exchange, FY 2015 also saw the company have many

investments with the launches of two networks which further explains the lower EPS. The EPS for 2017 is estimated to

be $2.50, a 23% over the previous year and represent over 80% earnings growth since 2013. This growth will derive

from a combination of higher affiliate fees, improved profitability from the sale of its DBS segment, and its pay-TV

international growth. FOX will grow all five of its segments in the next 3-years at a higher rate than all of its competitors

as its recent investments will begin to realize returns. Its next earnings release will be May 6th which management

believes will be $0.40 per share. With foreign exchange accounting for over 70% of the lowered guidance, we see Foxs

strong organic growth as a sign that the company remains strong fundamentally and should continue its previous history

of surpassing estimates.

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Cash Flows and Capital Expenditures

Cash flow from operations for FY 2015 is projected to

be $4.8 billion, up significantly from $3.0 billion in FY

2014. Looking forward CFFO is forecasted to increase

at a 15.53% CAGR from FY 2015 to FY 2019. This

increase is due to the company beginning to capture

cash flows from its recent investments in new networks

such as Fox Sports 1 and FXX both of which have

launched since 2014. Moreover FOX News, FSN, and

FSN will continue to increase their affiliate, also

increasing top line. Bottom line growth will occur as

margins expand from divestitures, specifically the

divesture of the 7% EBITDA margin direct broadcast

satellite TV segment. Going forward, FOX will be able

to expand into more profitable segments, mainly the

37% EBITA margin cable network programing segment. Free cash flow (FCF) for FY 2014 was reported $2.3 billion

and is forecasted to increase to $4.5 billion in FY 2015. Looking forward, free cash flow is forecasted to grow at a

5.17% CAGR from FY 2015 to FY 2019. This is attributable to the companies increased CFFO while capital

expenditures remain constant. Management mentioned that FCF will continue to be used to return value to shareholder

by way of dividends and share buybacks. The company also mentioned an emphasis in investing organically in new

programing and possible strategic M&A if another opportunity presents itself. Overall management has been very vague

in their future application of companys FCF. From what our sector has read, we believe that the company is most

probable to use its FCF for (in order of likelihood), a strategic acquisition, shareholder returns in the form of buy backs,

and paying off debt. Capital expenditures for FY 2014 was reported at $678 Million, up 9% YoY. Capex spending for

2015 is projected to be $616 M. The recent development and release of both FXX and Fox Sports 1 accounted for a

significant amount of spending. The Cable Network Programming and Television segments make up about 30% of

capex combined. Moving forward, Capex is project to remain relatively constant as the company recently sold its DBS

segment (to BskyB) which accounted for roughly 50% of capex spending in 2014 and at a similar rate the previous year,

and produced minimal returns with diminishing margins to the overall business. Moving forward FOX will spend more

of its capital expenditure budget on programming and further channel developments.

Profitability Ratios and DuPont Analysis

FOX ROE of 26.23% was lower than the previous years (34.05%), but this can mostly be attributed to the divesture of

its SKY business and adverse foreign exchange. Overall FY 2013 was a more profitable year than FY 2014, analyst and

management see FY 2014 & 2015 as investments years, which the company will see a lot of return on its investments

like FXX and Fox Sports 1 moving forward. Disregarding 2013, 2014 profitability ratios were the highest mark in its last

five years. Looking at Foxs ROE against competitors, FOX holds a higher ROE than all except CBS whose high tax

burden of 137% is an outlier. FOX however is the most levered company in its comp group which is reflected in its

ROE. Despite having lower return on sales, we see this mark improving moving forward as the forex charges have

heavily impacted its profitability but its affiliate growth and overall margins should improve from selling its DBS

segment.

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Shareholder Returns

FOX has been able to consistently return value back to shareholders, it repurchased $2.9B in shares from July 1 to Feb

2015. FOX remains on track to complete the remainder of its scheduled $6 Billion in buybacks through the rest of FY

2015 (June to June fiscal calendar). FOXs 3-year dividend growth rate is 15.17% and 5-year growth rate at 15.29%. It

recently increased its dividend by 20% to $0.15, with a dividend yield of 0.89% paid out semi-annually. FOXs dividend

is slightly lower than its competitors as both, Disney and Comcast have a higher dividend yield. We see this as an

opportunity for FOX to increase dividend moving forward as management has stated that they are currently very liquid

as a result of selling some its assets. Its dividend ratio is 14.96 which increased YoY since 2010, with FY 2013 being an

outlying year. We believe FOX will continue to increase its dividend at a similar pace moving forward and continue to

implement similar share repurchase program with its excess cash flows.

Debt

FOXs Debt to Equity (D/E) ratio increased from 79.72% to 88.88% YoY. Overall its long term debt slightly increased

from $8,435 to $8,856 YoY. We do not see this as a factor moving forward as FOXs interest coverage ratio is nearly 5x

and it has remained stable despite the added debt. The companies $2 Billion revolver expires in May 2017. It has

principal payments of $200, $400 for the next two years with no principal payment due in 2017. Its interest payments

are $785, $1086, $1054 for 2015, 2016 and 2017 respectively. But as mentioned we see Foxs growing EBIT and

increased profitability will allow them to make these payments without issues. FOX has a WACC of 8.0%, which is

comprised of 81.1% from equity, FOX has a lower WACC than its competitors, Disney (9.3%), CBS (8.7%) while TWX

(7.4%) has a slightly lower WACC as their capital structure is more comprised of debt. FOXs current ratio and quick

ratio of 1.74 and 1.34 are larger than its competitors and further shows the companys ability to pay back its liabilities.

FOXs credit rating is BBB+ from S&P and Fitch which is investment grade and the highest rating the company has

received to date. Competitor CBS & Time Warner have a BBB rating while Disney holds an A rating.

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VALUATION

Peer Group

FOX is currently trading at 17.3% discount to its 3-year historical spread against competitors Disney, CBS, Time

Warner. We believe that FOXA should trade back at its historical premium to these competitors due to the growth

opportunities that FOX has comparatively in emerging markets as well as its diversified offerings. We decided to use the

comps above due to their similarities to FOX, where entertainment makes up about 85% of their total revenue

compared to 67% for Disney (DIS), 94% for Time Warner Inc (TWX), and 75% for CBS Corp (CBS).The remaining

part of FOX revenue is made of its Cable & Satellite of which its other competitors do have smaller % of revenue in this

segment. Disney offers ESPN and its family of networks which is the main competitor to Foxs broad offering of

Regional Sports Networks. To rival ESPN, FOX developed and released its own major sports network in FOX Sports 1,

which as of early 2015 has already surpassed ESPN2 in viewership and will serve as a rival for the worldwide leader in

sports moving forward. Where we see its competitors growth slowing in FY 2016 and FY 2017, FOXs growing at a

faster pace through those years and we believe that the current discount and multiple is not reflective of its growth.

Undervaluation

FOX is currently trading at a 17.3% discount to its 3-year historical P/E spread against a comp group comprised of

competitors in the Media & Entertainment industry CBS, Comcast, and Disney. FOX is also trading at a 13.75%

discount to its own 1-year P/E average multiple and a 3% discount to its 3-year average. FOX has historically traded in

line with these competitors (.904 R^2 3-year correlation & .961 5-year) and at a 5% premium. This undervaluation

occurred after FOX announced their 2Q FY 2015 earnings where despite reporting $0.56 EPS for the quarter versus an

$0.53 estimate (27.41%) surprise, FOXs stock price decreased nearly 6% as they lowered their guidance for the rest of

FY 2015 due to higher than expected foreign exchange as well lower advertising revenue, which was seen throughout the

industry. About 31% of FOXs revenue comes from Europe and 13.4% from Asia and other markets. We see this

downside as already priced in, and see FOX trading at discount at 16.7x its FY16 earnings, and 13.64x its FY17 earnings.

As far the dispute with Dish, investors sold off as Dish entered into a dispute with FOX over broadcast fees and

dropped both Fox News and Fox Business networks. This was resolved through a multiyear contract a few weeks after

although we believe that this displayed the strength in Foxs leverage as Dish lost more than 90,000 subscribers. Despite

the resolve, FOX has not yet returned to trading at the multiple before this event. We see FOX as the company trading

at the most attractive value in its industry and see its current discount to its competitors and own historical multiple as

unwarranted due to its strong earnings growth in FY 2016, and beyond. For these reasons we believe that FOX should

return to its 3-year historical multiple to its competitors.

Peer P/E Multiple

21.0x

Mean Factor

1.056

P/E Multiple

22.1x

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DCF Assumptions

We projected for sales growth, of 5.5% and -10.5% growth for FY 2014 and FY 2015, respectively. The negative growth

in FY 2015 are a result of the company's divestiture of its DBS segment. Overall our sales projections are marginally

lower than analysts. Many analysts are forecasting sales with their ideas of how future motion picture and television

shows will financially preform. We want to show a more conservative model for the company to account for possible

underperforming motion pictures and shows. Upsides from successful media will only add to our expected return. We

forecast gross margin will expand from 33.8% in FY 2014 to 35% in FY 2015 and 37%% in FY 2018 and remain

constant hence forth. The company divested its underperforming DBS segment (made up 7% of EBITDA margins).

Moving forward, gross margin expand and FOX will increase investments in international Cable Network Programming

and Television segments (37% EBITDA margin). SG&A was calculated by looking at the previous three years and raised

incrementally to reflect analysts models. Remaining projections were forecasted by using the previous three years and

forecasting similar results.

WACC Calculations

The WACC of 8.59 % was calculated the taking the average equity and debt weights for the previous five year along with

their current weight. The average equity weight was calculated at 76.1% and the average debt weight was calculated at

23.9%. Cost of equity was calculated to be 9.32% by using the expected market return of 9.32%, risk free rate of 1.92%,

and a beta of 0.99. Cost of debt was found to be 1.43% using an effective tax rate of 24.0%, short term debt total

percentage of 4.19%, short term debt rate of 0.56%, long term debt percentage of 95.81%, and a long term debt rate of

1.92%. By adding the product of average debt weighting and the cost of debt, and the product of average equity

weighting and the cost of equity, we derived a WACC of 7.43%

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APPENDIX

Exhibit 1) Total TV Advertising Revenue

Exhibit 2) 3 Year P/E

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Exhibit 3) 3 Year P/E Spread Aginst DIS, CBS, and TWX

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DISCLAIMER

This report is prepared strictly for educational purposes and should not be used as an actual investment guide.

The forward looking statements contained within are simply the authors opinions. The writer does not own any

21st Century Fox, Inc. stock.

TUIA STATEMENT

Established in honor of Professor William C. Dunkelberg, former Dean of the Fox School of Business, for his

tireless dedication to educating students in real-world principles of economics and business, the William C.

Dunkelberg (WCD) Owl Fund will ensure that future generations of students have exposure to a challenging,

practical learning experience. Managed by Fox School of Business graduate and undergraduate students with

oversight from its Board of Directors, the WCD Owl Funds goals are threefold:

Provide students with hands-on investment management experience

Enable students to work in a team-based setting in consultation with investment professionals.

Connect student participants with nationally recognized money managers and financial institutions

Earnings from the fund will be reinvested net of fund expenses, which are primarily trading and auditing costs

and partial scholarships for student participants.