Seven West Media Limited

Seven West sells stake in Yahoo7: Seven West Media Limited (ASX: SWM) is a multi-media company which operates through four segments: Television, The West, Pacific, and other business & new ventures. The company recently announced that it has finalised the sale of its 50% interest in Yahoo7 to Verizon Media. It will receive $20.75 million in cash for its shares this financial year. SWM now fully owns and operates all of its ‘direct to consumer’ digital products.In another update, Schroder Investment Management Australia Limited ceased to be the substantial holder of the company since March 19, 2019.

In its H1FY19 results, it reported decrease in its revenue by 1.5% pcp to $798.9 Mn. The company’s underlying net profit after tax of $91.8 million is down 7.8 per cent on the previous half year underlying profit after tax of $99.6 million.


H1FY19 Financial Metrics (Source: Company Reports)

What To Expect From The Company:The transformation of Seven’s television business is continuing at pace. The strategic priorities in the business unit mainly consists of focusing on the core, driving greater ratings as well as revenue share performance and transforming television operating model and continue to identify as well as extract operational efficiencies and cost savings. In its guidance for FY19, underlying group EBIT growth is expected to be in between 0-5%. Its leverage ratio is expected to reduce below 2x at end of FY19.

Stock Recommendation:Its current ratio has improved from 1.68x in H1FY18 to 1.71x in H1FY19, which implies its better ability to address its short-term obligations than the previous corresponding period.

Hence, considering the aforesaid facts and current trading level, we recommend our “Hold” rating on the stock at the current market price of $0.525 per share (down 0.943% on 12 April 2019).
 

Nine Entertainment Co. Holdings Limited

Better Synergy Estimates Following Merger With Fairfax Media:Nine Entertainment Co. Holdings Limited (ASX: NEC) spans in areas such as news, lifestyle, entertainment, and sport. Its assets include the Nine Network, major mastheads such as The Sydney Morning Herald, The Age and Australian Financial Review, digital properties such as nine.com.au, 9Honey, Pedestrian.TV, and CarAdvice. The company recently announced a change in voting power of its substantial holder FIL Limited and the entities, from 7.52% to 5.71%, which was done on April 5, 2019. In another update, Nine Entertainment provided amendment update to the initial director’s interest notice where Patrick Allaway held a total of 73,524 fully paid ordinary shares under Venuston Pty Ltd as trustee of the Allaway Family Super Fund.

In its H1FY19 result, it reported decrease in its revenue by 1% pcp to $709.8 Mn. Around 55% of the revenue is contributed from broadcasting and rest 45% from businesses that are in strong long term growth markets. Its 39% growth in Digital & Publishing EBITDA underpinned by more than 50% growth in both Metro Media and 9Now. The Board of Directors declared a fully franked interim dividend of 5 cps with payment date on April 18, 2019.

After the merger between Nine and Fairfax Media in December 2018, total annualised cost synergies were estimated to be at-least $50 Mn, with nearly half the saving sourced from corporate costs, around 30% from sales and the rest from Digital & Publishing.Nine Entertainment has revised the total cost synergies estimate to around $65 Mn.

 

H1FY19 Financial Metrics (Source: Company Reports)

What To Expect From The Company:Nine Entertainment expects increase in current quarter revenue (y-o-y) by around 3%. Its full year FTA costs are expected to be down by around 4%.Its digital and publishing is expected to continue to grow through H2 FY19 and into FY20, driven both by top line growth and further cost efficiency gains in Metro Media and continuing strong growth at 9Now.

On the back of the increased subscriber numbers, and the recent price increase, Stan expects to be profitable in Q4 FY19, and report a positive contribution to EBITDA in FY20.

Stock Recommendation:The company’s stock posted -7.88% return in the span of previous 6 months and, in the time horizon of three months, the return was 14.53% which reflects that the stock is quite volatile.Based on the foregoing, we suggest to the investor that it might be better to wait and watch out the stock at the current market price of $1.695 per share (up 1.802% on 12 April 2019) for further performance drivers.
 

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