Nine Entertainment Co. Holdings Limited

 

NEC Details
 
Growing Digital Market to Drive Business Growth:Nine Entertainment Co. Holdings Limited (ASX: NEC) operates in media and entertainment segment and specializes across linear television, digital, print and now radio.

FY19 Financial Highlights for the period ended 30 June 2019: NEC announced full-year results for FY19, wherein the company reported revenue at $2,341.7 million as compared to $2,364 million in FY18. Group EBITDA and NPAT grew by 10% and 9% on y-o-y basis to $423.8 million and $224.8 million, respectively.Broadcasting segment reported a 5% decline in revenue at $1,221.8 million, while digital and publishing reported a revenue of $637.3 million as compared to $619.6 million in the previous financial year, posting a yoy growth of 3%.


FY19 Financial Highlights (Source: Company Reports)

Q1FY20 Update for the period ended 30 September 2019:  During the July-September quarter, the Broadcast Video on Demand (BVOD) market grew by 34% and the market-share remains just below 50%. As per as the Metro Media segment is concerned, the company continued to gain share across both print and digital mast-heads and further benefited from merger synergies. Metro Free to Air business achieved a leading revenue share of 39.8%, while the broader market was down by 6.4% on y-o-y basis.

Guidance: As per FY20 guidance, the company expects Free-to-air (FTA) market to decline by mid-single digits across the full financial year along with 2.5% higher FTA costs.

Stock Recommendation: The stock of NEC is trading at $1.715 with a market capitalization of $2.92 billion. Currently, the stock of NEC is quoting slightly above the average of it 52-week trading range of $1.305 and $2.130. The stock has corrected 8.04% and 7.05% in the last three-month sand six-months respectively. The stock is available at a price to earnings multiple of 9.81x on trailing twelve months (TTM) basis as compared to the industry median of 12.8x. The stock has higher dividend yield of 5.8% as compared to the industry average of 5%. The company has been investing in the technology, and now it has data capabilities to compete in the broader digital video market. Considering the aforesaid facts, recent stock price movement, trading levels, and business prospects, we recommend a ‘Buy’ rating on the stock at the current market price $1.715 as on 14 November 2019.

 
NEC Daily Technical Chart (Source: Thomson Reuters)
 

Seven West Media Limited

SWM Details

Recent Update on Program Supply Agreement with Prime:Seven West Media Limited (ASX: SWM) is involved in providing free to air television broadcasting, newspaper and magazine publishing, and online and radio broadcasting. Recently, Peter Joshua Thomas Gammell and The Hon. Jeffrey Gibb Kennett AC, are ceased to be directors in the company, effective from November 13, 2019. In the Annual General Meeting, Ms Colette Garnsey OAM has been elected as Director; Mr John Alexander has been re-elected as Director; Mr Ryan Stokes has been re-elected as Director; and Performance Rights has been granted to the MD & CEO.

In another update, Prime confirmed that the ‘Program Supply Agreement’ (PSA) with SWM, contains a change of control provision. According to the provision, SWM may terminate the PSA where a change of control has occurred in respect of Prime or certain Prime group members without SWM's prior consent. Under the terms of the PSA, a change of control of Prime is deemed to occur if a person comes to control or beneficially own more than 25% of the ordinary shares of Prime.

FY19 Key Highlights for the period ended June 30, 2019: Total group revenue and other income for the period was reported at $1.56 Bn, a decrease of 4% on previous year. Group’s operating costs decreased by 3% to $1.35 Bn. EBIT for the period declined by 10% to $212.1 Mn. Underlying net profit after tax declined by 7.9% to $129.3 Mn.


SWM’s Key Metrics (Source: Company Reports)

What to Expect:EBIT for FY20 has been estimated to be in the range of $190 Mn to $200 Mn, including the impact of AASB16. The Company is determined to maintain cost discipline and to deliver operating savings. TV metro ad market is expected to decline by low single digits, whereas the BVOD market is expected to grow more than 25%.

Stock Recommendation:SWM’s share generated a negative YTD return of 19.81%. The stock has risen from its 52-week low level of $0.350 by ~20%. Its EV/Sales and EV/EBITDA multiples on TTM basis stand at 0.8x and 5.2x, lower than the industry median of 1.0x and 5.8x, respectively, indicating an undervalued position at the current juncture. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.420, down 1.176% on November 14, 2019.

 
SWM Daily Technical Chart (Source: Thomson Reuters)

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