One Media Stock to Sell - Nine Entertainment Co.

NINE ENTERTAINMENT CO. HOLDINGS LIMITED (ASX: NEC)

NEC Details

Improved Ratings and Revenue Momentum: Nine Entertainment was seen to gain traction through the latest half year result wherein Total Revenue of the Group for 1HFY18 increased by 9 per cent as compared to prior year. The cash flow from operating activities (pre-specific items, interest and tax) was $96.4 million in H1FY17 but touched $180.7 million for H1FY18. Basic EPS for H1FY17 was 8.6 cents per share that rose up to 13.3 cents per share for H1FY18. Dividend per share of 4.5 cents per share for H1FY17 surged to 5 cents per share for H1FY18. The group’s debt was significantly narrowed from $177.5 million to $46.2 million and this led the leverage ratio come down to 0.2x EBITDA (earnings before interest, taxes, depreciation, and amortisation). For Digital business, the streaming platform 9NOW witnessed an 80 per cent rise in streaming and Stan’s subscription revenue rose by 83 per cent.

NEC is the only Australian media business with a unique set of video-based assets and which combines the enduring strength of Free to Air TV with high growth businesses in each of BVOD, SVOD and Digital Publishing. During the period, Nine’s ratings continued to improve. For the six months ending on 31 December 17, Nine attracted a commercial network share of 39.5 per cent of the 25-54 -year demographics. For rating season of 2017, Nine Network won all the key buying demographics and recorded growth of around 2-3 points on 2016 season. For the half year, Nine’s metro FTA revenue share was at 13-year high that is at 40 per cent which brought the CY17 total to 38.3 per cent (up by 3 points on 2016). The Group announced interim dividend of AUD 0.05 per share (30 per cent franked) which will be paid on 18 April 2018 basis ex-dividend date of March 06, 2018.
 

Net Debt Position (Source: Company Reports)
 
While the group now aims to enhance its dividend for FY18, the share price has risen by 54.6 per cent in the past six months and dipped by 3.4 per cent in the last five days. Given that Nine has recovered from its low levels with one year rise of 106 per cent at the back of momentum in the 2017 transformational year, we think investors can book profits on the stock. We give a “Sell” on NEC at the current market price of $2.31
 

NEC Daily Chart (Source: Thomson Reuters)

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