JP 摩根-亚太地区-互联网与媒体行业-九号台娱乐（NEC）与七西传媒公司投资策略-9-87页.pdf
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www.jpmorganmarkets.com
Asia Pacific Equity Research
11 September 2019
Nine Entertainment and Seven
West Media
NEC.AX, NEC AU
Overweight
Price: A$1.99 (10-Sep)
Price Target: A$2.55 (Jun-20)
Initiate coverage of NEC with OW rating and $2.55
PT, SWM with OW rating and $0.65 PT
SWM.AX, SWM AU
Overweight
Price: A$0.41 (10-Sep)
Price Target: A$0.65 (Jun
-
20)
Australia
Telecom Services, Media and
Internet
Eric Pan, CFA
AC
(61-2) 9003-8207
eric.pan@jpmorgan.com
Bloomberg JPMA EPAN <Go>
Abhinay Jeggannagari
(61-2) 9003 6734
abhinay.jeggannagari@jpmorgan.com
J.P. Morgan Securities Australia Limited
Equity Ratings and Price Targets
Mkt Cap
Rating
Price Target
Company
Ticker
(A$ mn)
Price (A$)
Cur
Prev
Cur
End
Date
Prev
End
Date
Nine Entertainment
NEC AU
3,409.52
1.99
OW
—
2.55
Jun
-
20
— —
Seven West Media
SWM AU
618.21
0.41
OW
—
0.65
Jun
-
20
— —
Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 10 Sep 19.
See page 84 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aw
are that
the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
We initiate coverage of NEC with an OW rating and $2.55 Jun-20 PT and of
SWM with an OW rating and $0.65 Jun-20 PT. NEC has successfully diversified
its revenue base away from its traditional broadcast TV business into digital media
post the acquisition of FXJ, and its low debt level provides opportunities for
further M&A or capital return. We expect SWM to undergo a similar
transformation as the new CEO has been brought in to transform the company
through M&A, either through a sale of the company or acquisitions that will
dramatically change the revenue composition. We also expect SWM's metro TV
revenue share to catch up eventually to its industry-leading audience share.
We estimate the TV ad market to decline in the low single-digits in the near
and medium term. The TV ad market has been relatively stable for the past
decade, despite double-digit declines in other traditional media, such as print.
However, the declines have recently accelerated to low single-digits over the
last one-, three- and five-year periods as more consumers take up SVOD and
BVOD programming; we expect this trend to continue for the foreseeable
future. We estimate NEC and SWM will both retain a 39% share of metro TV
ad revenues in this environment in the near and medium term, with Ten at 22%.
We initiate coverage of NEC with an OW rating and a Jun-20 PT of $2.55.
NEC has successfully diversified its revenue base away from its traditional
broadcast TV business into growth areas in digital media. With only 47% of
group revenues coming from TV, the business is now less susceptible to the
structural and cyclical headwinds of TV ad spend and its ownership of Domain
and Stan should help boost long-term growth. NEC’s low debt level should also
provide opportunities for further M&A or capital return.
We initiate coverage of SWM with an OW rating and a Jun-20 PT of $0.65.
We believe the new CEO has been brought in to transform the company through
M&A, either through a sale of the company or acquisitions that will
dramatically change the revenue composition, with the former more likely due
to its high debt level. In addition, the company is under-earning its metro TV
audience share and should see upside as its revenue share catches up.
SWM trades at a discount to domestic and global peers, while NEC is more
diversified. SWM currently trades at 4.6x FY20E EV/EBITDA and 6.4x P/E,
which is a significant discount to NEC at 7.2x and 15.3x and CBS in the U.S. at
7.6x and 8.0x. NEC derives only 47% of reported group revenues from TV, 15%
from digital and publishing, 22% from Domain and Stan and 6% from radio,
which is more diversified than CBS which derives 83% of revenues from
FTA/cable TV, 11% from local media, and 5% from book publishing.
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