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In today’s daily we have covered stock research on Nine Entertainment (HOLD).
The S&P 500 was down by 5.84 points or 0.28% on Thursday and closed at 2108.84 points. The Dow and S&P 500 edged lower at midday on Thursday as energy shares eased back with oil prices, while the Nasdaq advanced after deal news in the technology sector.Avago Technologies jumped 13 percent to $127.39 as the best performer on both the S&P 500 and Nasdaq 100 index after the company reached a deal to acquire Emulex for $8 per share. Emulex shares surged 25.8 percent to $8.
Apple shares also edged higher and were last up 0.8 percent at $129.77. Apple sent out an invite for a March 9 event, about one month before the much-anticipated launch of the new Apple Watch. Energy shares were the among the biggest drags on the S&P 500 and Dow. The S&P 500 energy index was down 1.5 percent as crude oil futures fell on rising inventories in the United States. After a sluggish start to the year, stocks have rebounded sharply in February. Both the Dow and S&P 500 are on track for their best monthly performance since October 2011, while the Nasdaq is on pace for its best month since January 2012.
APPLE Daily Chart (Source – Thomson Reuters)
S&P ASX 200 was down by 36.4 points or 0.61% on Thursday and closed at 5908.5 points. Qantas's half-year results were the most buoyant of the day. The company turned around a previous first half's pre-tax loss of $252 million to post an underlying profit of $367 million, which came in above its guidance of up to $350 million. Billabong also returned to the black, with a net profit after tax of $25.71 million, an impressive swing from a loss of $126.3 million while the surfwear company embarked on a three-year-long restructuring and writedown exercise.
Nine Entertainment posted a loss of $88.8 million, a 6.7 per cent fall on the first half of the 2014 fiscal year, in line with guidance. It will pay an interim dividend of 4.2. Nine shares were suprisingly the strongest performer for the day, up 9.4 per cent to $2.03. The market loser wasTransfield Services, which delivered a 75 per cent rise in first half profit to $8.4 million, but investors dumped the stock, and its share price lost 6.4 per cent to $1.53 as mining services companies continued to get battered. Data from the ABS showed a 2.2 per cent fall in business investment (capex) over the past quarter, and 3.6 per cent drop over the year.
Billabong Daily Chart (Source – Thomson Reuters)
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Stock Of the Day - Nine Entertainment (HOLD)
Nine Entertainment (NEC) is the focus of this report in view of the recently released interim results for FY15. The Company reported a dip of 6.7% in net profit after tax for first half pro forma a year ago to $88.8 million. This is consistent with guidance of $85 million to $90 million as conveyed in November 2014. NEC’s EBITDA dropped by 9.4% in view of the feeble Free-to-Air (FTA) advertising market. 1.9% dip in revenue to $829.2 million is another slight disappointment.
H1 FY15 Result (Source – Company Reports)
Interim dividend of 4.2 cents per share, unfranked has been declared and is payable on 17 April 2015. NEC plans to have fully franked final dividend for the year while bringing the full year payout ratio within the target range of 50-60%. Further, the Company reported operating free cash flow conversion of 78%. The closing net debt of $491m with conservative net leverage of 1.7X has been reported.
NEC’s metro and regional FTA advertising markets witnessed a drop of 3%. The Network Metro FTA revenue share bettered from 38.7% to 39.2%. Nine network has been still Australia’s most watched television network with 2014 ratings in the 25-54, 18-49 and 16-39 age demographics. Clear market leadership was recorded across these core demographics in six months to Dec’ 14. Key programming schedule changes led to increase in costs by $13.7 million (2.9%). NEC is continuing with its strategies and actions with regards to Digital transition and evolution following 100% acquisition of Mi9. The Digital business witnessed a drop of 21% in EBITDA on an underlying basis while there was 39% increase on the H1 FY14 Pro Forma result.
Nine’s Metro Ratings and Revenue Share (Source – Company Reports)
Nine Live reported an EBITDA decline of 10% to $36m with 24% dip in revenue on the prior corresponding period. Nine Live still expects to report EBITDA growth for FY15.
Ticketek’s Ticket Volumes (Source – Company Reports)
In addition to the above, NEC announced for an on-market share buy-back of up to $150 million. The shares have lately seen a rise in view of this announcement. The share buy-back is expected to be completed during the next 12 months. This decision has been backed by NEC’s sustained conservative leverage and strong underlying cash flow.
Nine Entertainment Daily Chart (Source - Thomson Reuters)
Given the above, the Company is still poised to meet 40% revenue target and seems to be on schedule for 2015. Initiatives such as strengthening of market position and increasing shareholder value through innovation and acquisition seem to be critical. Stan, the streaming JV with Fairfax Media which has been launched in Jan’ 15 serves as an example. NEC is also expected to leverage from sports events such as Cricket World Cup and Rugby World Cup along with various programs such as The Block and Gallipoli mini-series. Near-term share price sentiment may still remain cold in view of the growth in advertising industry and the level of competition. Under challenging conditions of advertising market, NEC seems to have responded fairly well despite certain dip in profit. NEC is also confident to provide 8-9% metro FTA revenue growth in current quarter while not much is reveled about the June quarter. The Company re-affirmed previous guidance of full year EBITDA at least in consensus with last year’s $311m. Growth in Net Profit after Tax of ~10% is being expected.
Accordingly, we put a HOLD recommendation for the stock at the current price of $2.03.
Team Kalkine
Level 13 167 Macquarie Street
Sydney NSW 2000 Australia
E-Mail - [email protected]
Phone - 02 8667 3147
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