Thomas Weisel analyst Gordon Hodge has come out with a very detailed tome on Time Warner, spelling out the bullish case. The basic premise is something others have been saying for a while now: that the company’s current value doesn’t adequately reflect the value of its various units, particularly its cable unit and AOL (NYSE: TWX). Things you’ve read and heard before.

An interesting part of the report is Hodge’s analysis of Time Inc’s revenues and digital potential (bullish again). Ann Moore, the CEO of Time Inc, told me Friday in NYC that the estimates in this report are closest she has seen (TWX doesn’t break out digital revenues separately in its financial reports), so we will take her word for it.

Hodge writes that growth in online revenues combined with cost cutting is offsetting declines in the print business. The company’s strategy has been to prune the portfolio of assets with a focus on titles that can work in the online space in order to capture the flow of ad dollars online.

Based on Comscore’s recent numbers, the traffic to Time Inc’s portfolio site has been growing nicely, as he puts it. And even though traffic to magazine sites is only a small portion of the total traffic at Time Warner including AOL, the effective CPM rates are considerably higher, given the targeting and brand association of the magazine content, the strong national advertiser relationships in
the magazine ad sales group and the overall quality of the Time Inc. brands, says the report. Reasonable best case assumptions, of course…no account for increasing competition and in some cases irrelevance of the brands themselves.

Now to the numbers: taking into account annualized pageviews for Time Inc (based on August ‘07 Comscore numbers), “at 85% sellout and $25 CPMs, or an effective CPM of $21.25, the publishing group could drive $175mn in annual revenue, which would equate to approximately 3% of total Publishing revenue of $5.25bn in 2006. Were the company to monetize its international page views at half the rate of the United States, this could add an additional estimated $27mn to the $175mn figure.” There you have it.