Nine Entertainment, currently cutting jobs and overheads in response to a stubbornly weak advertising market and the loss of news revenue from Meta, has also lost its position next to the big players in the market.
The media group has been dropped from the S&P/ASX 100 Index, which is designed to measure the 100 largest companies by market capitalisation.
Nine has shed about half its value since it merged with Fairfax in 2018. It currently has a market capitalisation of about $2.2 billion. Its shares last traded at $1.39, down from a 12 month high of $2.215.
At that price private equity firms would be expected to start circling, following the scent of cheap assets.
And that’s exactly what the market is discussing, albeit as a possibility and not that offers have surfaced.
“Conditions are ripe for Nine to attract takeover interest,” said Brian Han, a director at Morningstar, in a note to clients.
“Its shares have been languishing since mid-2022, as the hangover from the COVID-19 bump in advertising is exacerbated by the impact of rising rates and skittish marketer sentiment.”
Recent internal issues, including allegations of sexual harassment, have dulled the shine on the media group.
The company is in renovation and repair mode with the departure of chairman Peter Costello following a scuffle at Canberra airport with a journalist.
And Nine is in the middle of an external review of its newsroom culture following allegations of abuse of power and “drunken, lecherous behaviour”.
“The current flux makes Nine vulnerable to opportunistic buyers willing to look beyond the near-term headwinds and focus on Nine's underlying assets,” says Han.
Morningstar, pointing to the media group’s market leading free-to-air television network, its streaming platform Stan, its holding in online classified site Domain and its news titles, has a $2.70 fair value estimate for Nine.
That would indicate a cheap buy, at the latest share price of $1.39, for anyone willing to wait for a lift in the share price or a private equity outfit prepared to take Nine private, make further cuts and do an exchange re-listing some time in the future.
However, any sale would need the blessing of billionaire Bruce Gordon, the owner of regional broadcaster WIN.
Gordon, aged 95, is the biggest shareholder of Nine with a 14.9% of Nine voting share and an economic (non-voting) stake of 25%
And he reportedly likes his investment. “We see Nine as a company worth investing in,” he told The Australian Financial Review.
Many market analysts like Nine as well, mainly for its standout diverse portfolio and for its increasing revenue from digital assets.
Australian investment bank Barrenjoey sees Nine as well-placed once ad markets rebound.
“Unfortunately, we have no line of sight as to when this could occur, and this likely relies on consumer confidence,” analysts said.
Nine’s full year results, to the end of June, will be announced next month but caution among advertisers continues, according to the latest media agency booking numbers.
However, Nine’s Paris Olympics broadcast should bring something of a lift and Guideline SMI (Standard Media Index) numbers are showing stronger in forward pacings.
The latest round of redundancies at Nine, revealed as the Meta deal ended, will help lower the financial impact of the loss of Meta revenue.
The actual level of revenue Nine had been getting from Meta hasn’t been revealed but analysts see the net impact between $10 million and $20 million.
Senior executives from News Corp, Nine and Seven West Media last month warned of risk to local news coverage and newsroom jobs if the federal government fails to ensure Meta renews its agreement to pay for news content.
Nine reported falls in revenue and profit in a "weak" advertising market for the half year to December. Revenue fell 2% to $1.37 billion in the six months. Net profit after tax was down 21% to $149.5 million.
The other ASX-listed television network, Seven West Media, reported a steep drop in net profit after tax, down 52% to $54.46 million for the half year to December, reflecting "weakness" in advertising.
However, Nine positions itself with a core of premium content fueling platforms across television, audio, streaming, publishing and marketplaces.
Analysts like the diversified earnings across subscription and advertising and a growing portfolio of digital assets with increasingly valuable first party data.
The half year results showed Nine’s digital revenue representing 48% of the group, with subscription and licensing at 30%.
In publishing, the results for the half year to December showed 9% growth in digital subscription and licensing revenue at metro mastheads.
Nine’s Publishing division includes the core metro media business, as well as nine.com.au, Pedestrian Group and Drive.
Together, publishing reported revenue of $289 million and digital now accounts for 61% of that revenue. However, digital advertising revenue declined by 17% across the six months.
Total subscribers grew 7% to more than 480,000 and registered users increased to more than 1.5 million.
A slide from Nine's half year results presentation:
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