Analysts are upbeat on Nine’s prospects since it restarted broadcast of the NRL.
Morningstar says the slump in the TV advertising market for April and May 2020 isn’t surprising given the economic havoc wreaked by the coronavirus.
Nine, like the rest of the media industry, is seeing rapid change in the advertising market from the economic fallout of the coronavirus crisis. The media group in March withdrew its profit guidance because of uncertainty.
The May SMI (Standard Media Index) numbers show media agency bookings for television down 35.6%.
Nine’s April free-to-air television revenue was down 29.8% compared to the same month last year, the media company told a conference in early May.
In the March quarter, Nine‘s revenue share was 43.9%, up 3.1 percentage points, according to the Macquarie presentation.
“The fight for that shrinking pie is intensifying, with a semi-resurgent TEN making ratings and revenue share headways,” writes Senior Equity Analyst Brian Han in a note to clients
“However, the lagging benefit of positive prior-period ratings performance and the return of live sports (National Rugby League, or NRL) should help maintain Nine's current 40%-plus revenue share.”
And Han says Nine’s balance sheet is well-equipped to weather the current turmoil.
“Critically, management is not letting a good crisis go to waste,” says Han.
The company has committed to cutting 2020 calendar year costs by $225 million in response to COVID-19, using the pandemic as a catalyst to cut payments for NRL rights.
Nine has also stepped up its three-year $150 million structural cost cutting program.
Han says, despite this progress, shares in Nine are trading at a 23% discount to Morningstar’s $1.80 fair value estimate.
“Perhaps the group's name still conjures up the negative perception of a traditional TV business facing structural and cyclical headwinds,” says Han.
However, TV now only represents 45% of group earnings.
Investment bank Jefferies says Nine (NEC) is its preferred play in the Australia media space.
“NEC is a true multi-media company and is doing a better job in utilising content across its assets,” write Jefferies analysts in a note to clients.
“What they are doing now with the acquisition of radio and moving talent/cross promoting is quite significant.
“NEC also has a strong sales strategy and may be getting a higher revenue share than its ratings share suggests.
“Its BVOD program 9Now is significantly ahead of competitors.is more bullish.
“Without (presenter) Alan Jones, radio could attract a younger audience, and having a less politically defined presenter is a good thing for NEC.”
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