The listed Australian media sector took a hammering yesterday when the best performed of the handful of companies – radio and regional TV operator, South Cross Austereo warned of a sharp slowdown in revenue in the first months of 2019-20.
While Nine shares rose 2% to $1.77 in early trading on the news of the sale of ACM, Domain shares slid nearly 8% at one stage after it revealed a 13% slide in third-quarter property listings and a fall in revenue for the third quarter.
Fairfax Media and Nine Entertainment shares rose yesterday after Fairfax shareholders ignored a last minute attempt to destabilise the $2.8 billion deal by former Fairfax property executive, Anthony Catalano.
The extent of the TV weakness, highlighted at the AGM, was greater than Credit Suisse expected. The company is now guiding to low single-digit growth in FY20 operating earnings (EBITDA). Growth is expected to be skewed to the second half.
Morgan Stanley assesses the weak advertising market is presenting challenges but is increasingly convinced the company has opportunities to create value. This should mean its shares outperform over the next 1-2 years.
The company has won the exclusive live rights to the tennis for the 2020-24 seasons. Nine Entertainment is paying $60m in cash costs per annum. UBS believes there is potential for the company to monetise the pay-TV component.
Nine’s AGM trading update was upbeat, highlighting a first half ad market decline not as bad as feared. The second quarter even looks slightly positive. Nine’s market share also appears to be well above expectations provided at the company’s August result, the broker notes.