Nine Entertainment Co Holdings Ltd

NEC details
Growth in catch up streams at 9Now: Nine Entertainment Co. Holdings Ltd (ASX: NEC) had reported 4.5% and 6.4% year-on-year (yoy) decline in revenue and EBITDA at $659 million and $120 million, respectively for half year 2017 results. Net Profit after Tax declined by about 4% yoy to $75 million. Statutory results included specific Items of $312 million after tax, primarily a $260 million non-cash impairment of goodwill and the $85m (pre-tax) settlement to exit key elements of the output deal with Warner Bros, as indicated earlier. The group reported for net loss after tax, inclusive of specific items, of $237m. During H1FY17, company witnessed 71% growth in registered users and 74% growth in catch up streams at 9Now across six months. Further, the company disposed of its interest in Southern Cross Media (SXL) during the period for a pre-tax gain of $29m. Interestingly, on-demand businesses are growing strongly and its AVOD platform, 9Now has more than 2.9m registered users, providing a growing first person database that enables advertisers to target audiences and will ultimately deliver better revenue.The company’s SVOD Joint Venture Stan, is clearly the leading domestic player in a growing space with more than 700,000 active subscribers and heading towards positive cash flow during FY18.
 

H1FY17 Financial Summary (Source: Company Reports)
 
Stock has moved up by 48% over the last six months as on May 02, 2017 and currently trading at close to 52 week high. There has been a 4.7% uplift seen until post noon in the stock price on May 03, 2017. Given the current business environment, we give a “Hold” recommendation on the stock at the current price of $ 1.32
 

NEC Daily Chart (Source: Thomson Reuters) 

Ten Network Holdings

TEN Details
Market conditions remain challenging:Ten Network Holdings Ltd.’s (ASX: TEN) Television revenue grew by 2.1% yoy while posting EBITDA loss of $2.4 million for H1FY17. During the 24 months to the end of February 2017, company’s revenue share increased in 22 of those months and revenue share of 25.2% for the first half of the 2017 fiscal year was highest six-month share in the past five years. H1FY17 revenue and revenue share was driven by investment in local content and the audience momentum TEN has built in recent years, along with the continued success of partnership with Multi Channel Network Pty Ltd.
 

H1FY17 Financial Summary (Source: Company Reports)
 
TEN has commenced a transformation program to improve all aspects of the business and expects to improve revenues through a range of initiatives that complement the MCN relationship and expects to achieve significant cost savings, most of which will fall in the FY2018 onwards. However, higher Television costs are expected to impact the financial result going forward and challenging capital city free-to-air television advertising market conditions are expected to prevail. TEN stock has declined 73% in the last three months as on May 02, 2017 owing to concerns relating to losses during H1FY17. Given the difficulties in servicing its debt, and operating inefficiencies, we give an “Expensive” recommendation on the stock at the current price of $ 0.24
 

TEN Daily Chart (Source: Thomson Reuters) 

Seven West Media Ltd

SWM Details
Subdued Outlook: Seven West Media Ltd (ASX: SWM) posted a 1% yoy growth in revenue and 27.7% yoy decline in underlying EBIT at the back of challenging conditions. Profit after income tax stood at $95.7 and decline in EBIT is in line with earlier guidance. Group operating costs decreased by 3.8% while newspapers delivered cost reductions of 3.9% during the same period. Moreover, Pacific has undertaken a major restructure with the realignment of its portfolio, sale and closure of certain titles with more than 20% headcount reduction. Thus, material cost savings are expected to flow into H2FY17. Pacific implemented the first phase of a transformation plan with the realignment of its portfolio and is now the leading mobile publisher in the country with growing digital audiences by 177%. SWM has completed a pivotal transaction (The West Australian completed the acquisition of The Sunday Times and Perth Now) in the company’s transformation with material synergies to be realized in the coming period. SWM stock has declined about 31% in the last one year as on May 02, 2017, on account of its H1FY17 earnings and subdued earnings outlook for FY17 (underlying EBIT to be down 20%). We give a “Hold” recommendation on the stock at the current price of $ 0.75
 

SWM Daily Chart (Source: Thomson Reuters) 

Southern Cross Media Group Ltd

SXL Details
Selling of northern NSW regional television operations: During H1FY17, Southern Cross Media Group Ltd (ASX: SXL) revenue grew by 9.2% primarily driven by growth in regional TV revenue and improved sales practices across all businesses. While EBITDA grew by 1.3% to $92.6m, NPAT grew by 11.8% to $48.5m. Company’s seamless transition to Nine Network in key TV markets in Queensland, Victoria and Southern NSW with increased focus on monetization and local content led to increased EBITDA to cash conversion of 82.4% against 74.0% in H1 FY16. FY17 EBITDA is expected to be at the lower end of the guidance range of $177m-$183m. In Q2FY17, SXL has announced the disposal of non-core assets including 45 transmission sites, while preserving long term access rights. The group also revealed about selling of its northern NSW regional television operations to WIN Corporation for $55 million. Such a move seems to be indicating for some sort of consolidation in the regional television market. SXL stock has declined by 13.5% year to date as at May 02, 2017 given the challenging business environment.We give an “Expensive” recommendation on the stock at the current price of $ 1.37
 

SXL Daily Chart (Source: Thomson Reuters) 

Fairfax Media Ltd

FXJ Details
NZCC declines the proposed merger of Fairfax New Zealand Ltd and NZME Ltd:Fairfax Media Ltd (ASX: FXJ) has updated that the New Zealand Commerce Commission (“NZCC”) has declined to grant the authorisation to the proposed merger of Fairfax New Zealand Ltd and NZME Ltd, citing that proposed merger will lead to having influence over the news and political agenda by a single media organisation creating a risk of causing harm to New Zealand's democracy and to the New Zealand public. FXJ intends to review the NZCC’s reasons for the decision. Lately, FXJ had started consulting its Australian Metro Publishing newsrooms on proposed changes to complete the major structural editorial changes required to secure the futures of the metropolitan mastheads. The proposal is expected to deliver approximately $30 million in annualised savings starting FY18. During H1FY17, FXJ reported a underlying revenue decline of 5.8% yoy at $902.9 million while posting 9.9% yoy decline in EBITDA at $145.1 million. However, net profit after tax grew by 6.1% to $84.7 million driven by lower depreciation and finance charges. Company’s Domain Group delivered strong digital advertising growth of 15% yoy and cost reduction programs underpinned a 5% decline in operating expenses. Recently, FXJ announced a strategic review of the Domain Group in preparation for Domain’s potential separation into a new Fairfax controlled ASX-listed entity. The separation of Domain would further reshape the Fairfax portfolio by adopting a more flexible corporate structure to maximise shareholder value. Fairfax would continue to own a controlling majority of Domain (between 60% and 70%), while issuing shares in Domain to Fairfax shareholders at the time the separation is implemented. We give a “Hold” recommendation at the current price of $ 1.07
 

FXJ Daily Chart (Source: Thomson Reuters) 

News Corp

NWS Details
Results impacted by one time impairment charges:For Q2 FY17, News Corp (ASX: NWS) total revenue de-grew to $2.12 billion from $2.16 billion of prior corresponding period, due to negative growth in News and Information Services segment and negative impact from foreign currency fluctuations of $53 million. However, EBITDA witnessed growth driven by Digital Real Estate Services as its revenue grew 16% yoy.  Notably, Digital revenues increased to 27% of News and Information Services segment revenues, against 22% in H1FY16. Growth in the Digital Real Estate Services and Book Publishing segments was more than offset by lower advertising revenues at the News and Information Services segment. NWS posted loss of $219 million as compared to $249 million profit in the H1FY6 on account of impairment charges, primarily related to the write-down of the fixed assets at the Australian newspapers. The company witnessed the efficacy of strategic reinvestment and digital diversification as it significantly increased operating profitability in Q2FY17, despite continued headwinds in print advertising. Although the stock has moved up over 5% in the last three months as on May 02, 2017, the trading conditions look challenging, and we give an “Expensive” recommendation at the current price of $ 17.22
 

NWS Daily Chart (Source: Thomson Reuters)

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