Nine Entertainment Co. Holdings Limited

H1 FY19 results to come on February 2019: Nine Entertainment Co. Holdings Limited (ASX: NEC) is a media company. It is into the business of television broadcasting along with program production and thus, primarily has two business segments i.e., Television and Digital segment. The company is also into content creation along with distribution and has digital and other media related activities.


FY18 Financial Metric (Source: Company Reports)

On the financial front, the company has reported revenue numbers of $1,318.2 million in FY18 compared to $1,237.8 million in FY17, up by 6% approximately, primarily driven by the contribution of 9Now segment.However, the group EBITDA increased by 25% YoY to $257.2 million because of 6% rise in the group revenues. The EBITDA margin of the company increased by 180 bps Y-O-Y to stand at 18.8% in FY18 compared to 17.0% in FY17.
The company’s current ratio declined by 14.7% Y-O-Y to stand at 1.62x in FY18 compared to 1.90x in FY17.

What to Expect From NEC: Going forward, in FY19, the company expects its reported Free To Air (FTA) Television costs to be down by 2-3%, reflecting both Nine’s change in summer sports, as well as the group’s ongoing tight cost controls.The stronger ratings performance of the company since the start of 2017 is expected to continue into CY19.  

The company has ~1.71 billion shares outstanding with the market cap of ~$2.48 billion, an annualized dividend yield of 6.87% and a beta of 1.20x (5-Years, Monthly). It has a P/E multiple of 6.06x as on 6 February 2019. During the past three months, the stock has generated a negative yield of 12.08% and trading close to the lower level. Today, the stock was down by 1.375% as compared to the previous close, currently trading at the price of level $1.435.We, therefore, recommend the investors to keep a watch on the stock and wait for upcoming 1HFY19 earning release which will be published on 21 February 2019.
 

Seven West Media Limited

Strong Financials Y-o-Y: Seven West Media Limited (ASX: SWM) is an integrated media company. It is known for its free to air television broadcasting, newspaper publication, broadcasting (radio as well as inline), and a subscription video on demand service.


Summary of Financial Performance (Source: Company Reports)

The company has reported revenue of $1,620.7 million in FY18 compared to $1,673.6 million in FY17, down by 3.2% Y-o-Y primarily driven by lower revenues from program sales and advertising revenues.The net profit after tax is reported at $134.9 million in FY18 compared to a loss of $745.0 million in FY17. This was however on the back of lower significant items in FY18.

Among the key ratios, the asset turnover improved by 17.1% to 0.88x in FY18 compared to 0.75x in FY17. The current ratio also grew by 21.8% Y-O-Y to 1.64x in FY18 compared to 1.35x in FY17. 

What to Expect from SWM Moving Forward: The operational changes made in the financial year will position the company to be more competitive and fit for the modern media landscape. The company’s EBIT is projected to grow in FY19 with an ongoing focus on ratings leadership, revenue share, the delivery of cost savings and strengthening of the Company’s balance sheet.

The stock is, however, trading at $0.520 per share and is currently having a PE multiple of 6.010x. It has generated a YTD return of 0.94% and trading close to the lower level. The EV-to-Sales for the company is currently at 0.9x, trading at lower multiple compared to the industry median of 1.2x. With lower comparable EV to sales ratio and improvement in the above-mentioned ratios Y-o-Y, we maintain our “hold” rating on the stock at the current market price of A$0.520 per share (down 2.804% on 6 February 2019).
 

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