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Highlights

  • NEC shares have underperformed the ASX benchmark S&P/ASX 200 index in the recent past.
  • The stock has fallen 3% in the last one year.
  • Nine Entertainment’s financial performance has been relatively better than its peers.

Nine Entertainment Co Holdings Ltd (ASX: NEC) shares have underperformed the ASX benchmark S&P/ASX 200 index in the recent past. Over the last one month, the shares of this media company have fallen 8% as compared to 3.3% decline in the Australian equity benchmark. One reason behind this underperformance could be its 1FY23 earnings, which seem to have failed to impress market participants. NEC shares have fallen 8.5% since 23 February 2023 (when the company announced its 1HFY23 earnings) till date.

In 1HFY23, while the company's revenues increased by 5% annually to AUD 1,403.3 million, its net profit after tax declined by 16% annually to AUD 190 million. This net profit drop was primarily because of the decline in its EBITDA margin to 26.40% from 30.48% in 1HFY22. But the company's EBITDA of AUD 370 million was broadly in-line with the company's guidance provided in December 2022.

Despite the decline in its EBITDA margin, it is better than its peers in the industry. In the last 12 months ended 31 December 2022 (LTM), its NEC's EBITDA margin stood at 23.85%, which is better than its peers' average EBITDA margin of 21.8%. For this peer comparison, the companies considered are Seven West Media Ltd. (ASX: SWM), ARN Media Ltd (ASX: HT1), and Sports Entertainment Group Ltd (ASX: SEG). Here is how NEC's other LTM financial metrics compare with its peers' median.

Even if we scan through its previous five years' financials, we can see that its last three-year average EBITDA margin is 23.71%, and its five-year average EBITDA margin is 21%.

NEC's share price performance

NEC shares closed at AUD 1.885, declining 1.31%, on Wednesday (31 May 2023). Including today's fall, the stock has declined around 10.2% in the last six months and 14.3% in the previous one year. The stock is now trading 8.33% above its 52-week low of AUD 1.740 and 18.4% lower than its 52-week high of AUD 2.31. Despite having impressive numbers, NEC stock has failed to perform. This could be because of the worries about advertising revenue-driven businesses, as the overall economy is not expected to do well in the near future.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance. 

Note 2: The reference date for all price data, currency, is 26 May 2023. The reference data in this report has been partly sourced from EODHD/Others.