Things mgmt say/NEC/SKC

A few interesting reflections.


Firstly, here’s NEC (Nine Entertainment) back at the Macquarie conference with their introductory comments. Note that conference was at the start of May.

Strong opening, highlighted yellow.

Let’s check in with the market’s opinion, on the increasingly evident inherent value, YTD.

Definitely a degree of difference one can detect there, a share price starting a touch above $2 and moving towards low $1.30/sh.

Now NEC “looks” like it could be excellent value. Gearing is low at 1x ND/EBITDA, buyback in action, dividend yield is solid, and operationally they seem to have near record audiences, eyeballs, ratings and market share. Yet, it isn’t translating into earnings, and indeed, they keep calling out the weak advertising market, which is somehow both “getting worse” and “near the bottom”.

They suggest that when the cycle turns, those favourable metrics should put them in very good stead, and indeed it could be quite transformative.

But there’s still an astoundingly large gap between the value they explicitly suggest they are creating, and what the market sees. As such, they’d be better off scrapping the dividend entirely, and going all in for the buyback. But they do not.


Just re-reading the SKC (SkyCity, which we blogged about recently post their downgrade) transcript back from Feb, and noting just how wildly off base the comments re: the balance sheet proved to be.

For those less familiar with the story, 3 months later, another downgrade, project delays, more investigations, with dividends cut to 0 for the short to medium run. So there’s room between “healthy” and “ill to point of needing to sit down” in our analysis here.

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