Stocks’ Details
 

Nine Entertainment Co. Holdings Limited

Decent Profitability Margins in H1FY19: Nine Entertainment Co. Holdings Limited (ASX: NEC) is involved in Television broadcasting and program production along with digital, internet, subscription video and other media sectors. The company recently announced the departure of Mr Greg Barnes, CFO, who would be leaving the company at the end of August, after delivering the FY19 results to the market. In another update, NEC announced about a conditional takeover offer for all of the ordinary shares of Macquarie Media Limited that it does not already own at a price of $1.46 per share in cash.  

In 1HFY19, Revenue was reported at $709.8 Mn as compared to $719.6 Mn on pcp. The following picture provides an idea of the company’s key numbers:


H1FY19 Income Statement (Source: Company Reports)

What to expect: As per the release, EBITDA contribution for FY20 is expected to be 53% from Broadcasting. The growth in Broadcast Video On Demand (BVOD) market is expected to be 45% plus in both CY19 and CY20.

Stock Recommendation: NEC’s share generated positive YTD return of 27.41%. Its gross margin and EBITDA margin for H1FY19 stood at 39.3%, and 50.8%, better than the prior corresponding period of 33.8% and 23.4%, respectively, which implies an improvement in the financial performance of the company. Its current ratio for H1FY19 stood at 1.78x, better than the result in H1FY18 at 1.66x, which implies the company is in a better position to address its short-term obligations. Currently, the stock is trading below the average of 52 weeks high and 52 weeks low price of $2.565 and $1.305, respectively, indicating a decent opportunity for accumulation. Hence, considering the aforesaid facts and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $1.720 per share (down 3.911% on August 16,2019).
 

oOh!media Limited

OML’s Share Plunges Over 27% Over Reduction In CY19 Earnings Guidance:oOh!media Limited (ASX: OML) recently provided a trading update and revised guidance for the year ended December 31, 2019 (FY19). It expects to report revenue of $304.8 Mn for the half-year ended on June 30, 2019, which is an increase of 5% on a pro forma basis on the prior corresponding period. The underlying EBITDA is expected to be at $56.0 Mn, which is a 2% decrease on a pro forma basis for the half year. As per its previous earnings guidance for FY19, underlying EBITDA was expected to be in the range of $152 Mn and $162 Mn. The Company now expects Underlying EBITDA for the year ended 2019 to be in the range of $125 Mn and $135 Mn.

H1FY19 Financial Performance:Revenue for the period was reported at $482.6 Mn, which is an increase of 27% on pcp. NPAT was reported at $31.6 Mn, which is a 4% decrease, as shown in the following picture:


H1FY19 Key Metrics (Source: Company Reports)

What to expect: The company has recently confirmed that the integration of Commute remains on track with an expected run-rate of $16 Mn in cost synergies for FY19 with further synergies expected in 2020. Growth in operational expenditure in FY19 is expected to be below the previously forecast range 5-7 % while capital expenditure is expected to be in the middle of the $55-70 Mn forecast range.

Stock Recommendation: OML’s share generated negative YTD return of 13.82%. Its gross margin for FY18 stood at 46.8%, better than the result in FY17 at 46.2%. It is presently trading close towards its 52-week low level of $2.290. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $2.930 per share (down 27.475% on August 16, 2019 owing to the release of trading update and revised FY19 guidance).
 

Seven West Media Limited

Undervalued Position At The Current Juncture: Seven West Media Limited (ASX: SWM) recently announced the appointment of James Warburton as the Managing Director and Chief Executive Officer succeeding Tim Worner. In a previous update, Commonwealth Bank of Australia and its related bodies corporate, ceased to be a substantial holder in the company since 2 August 2019.

H1FY19 Financial Performance:Revenue and other income for the period was reported at $798 Mn, which is a decrease of 1.5% on pcp. The profit after tax for the period was reported at $85.8 Mn, which is a 13.9% decrease on pcp. The following picture provides an overview of the company’s key numbers in 1H FY19:



H1FY19 Income Statement (Source: Company Reports)

What to expect: SWM aims to focus on transforming the operating model and continuing to identify and extract operational efficiencies and cost savings along with growing new revenue streams.

Stock Recommendation: It is presently trading close to its 52 weeks low level of $0.375 with reasonable PE multiple of 4.75x. Its current ratio for H1FY19 stood at 1.71x, better than the result in H1FY18 at 1.68x, which implies the company is in a better position to address its short-term obligations. On the valuation front, its EV/Sales and EV/EBITDA for TTM stand at 0.8x and 5.1x, below the industry median of 1.0x and 5.4x, indicating undervalued position at the current juncture. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.400 per share (up 6.667% on August 16,2019).

Enero Group Limited

Decent Top-Line and Bottom-Line Performance in FY19: Enero Group Limited (ASX: EGG) recently published its results for the year ended on June 30, 2019. Its net revenue was reported at $129.5 Mn, which is an increase of 25% than the previous year. Its operating EBITDA increased by 53% to $20.7 Mn. International markets represented 54% of the Group’s Net Revenue and 61% of the Group’s Operating EBITDA. Its operating cash flow for the year increased by 27.5% on the prior year to $18.1 Mn, and it is in a Net Cash position of $9.5 Mn as on June 30, 2019. The Board of Directors declared a fully franked final dividend of 3.0 cents per share. It equates a total dividend of 5.5 cents per share dividend for the year. The final dividend will have a record date of 23 September 2019 and a payment date of 8 October 2019.


FY19 Key Financial Metrics (Source: Company Reports)

What to expect: The alignment under key service capabilities allow EGG for more agency touchpoints from existing clients. It was further stated that client diversification is providing access to the higher growth sectors.

Stock Recommendation: Its EBITDAmargin and net margin for H1FY19 stood at 9.2% and 6.5%, respectively, higher than the result in H1FY18 at 7.7% and 5.4%, respectively. It is presently trading close to its 52 weeks high level of $1.830, and therefore, probability for correction increases. As per the technical analysis, on daily framework chart Relative Strength Index (14 days) indicates that the stock is trading on the overbought region, which suggests weakness in buyer’s strength. Hence, considering the aforesaid facts and current trading level, we give an “Expensive” recommendation on the stock at the current market price of $1.780 pser share (down 2.198% on August 16,2019) and suggest investors to wait for better entry level.


Comparative Price Chart (Source: Thomson Reuters)

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