Why Are These Stocks In Spotlight- Nine Entertainment, Jumbo Interactive, ECS Botanics?

  • Nov 13, 2019 AEDT
  • Team Kalkine
Why Are These Stocks In Spotlight- Nine Entertainment, Jumbo Interactive, ECS Botanics?

Mergers & acquisitions, announcement of operational and financial results, legal and regulatory issues, receipt of licenses, and achieving milestones and records are few of the many events that make a stock the talk of the trade town.

On 13 November 2019 (AEST 12:43 PM), the benchmark Index S&P/ASX 200 was trading at 6,721.1, down by 0.47% or 31.9 basis points. In this article, we have cherry-picked three stocks that have recently updated the market with some significant developments:

Nine Entertainment Holds AGM, Discusses Current Trading Facts and Outlook

Home to Australia’s most trusted and loved brands covering news, sports, lifestyle and entertainment, Nine Entertainment Co. Holdings Limited (ASX: NEC) is Australia’s largest locally owned media company and tags itself to ‘Where Australia Connects’.

On 12 November 2019, the company held its Annual General Meeting, wherein Chairman Mr Peter Costello, AC addressed the audience. He stated that 2019 was a transformational year for NEC, with the major event being the merger with Fairfax, which concluded in December 2018 and changed the scale of the business, making NEC one of the largest multi-platform media companies in Australia, bringing in complementary premium assets.

With the merger being a big development, which provides greater opportunities in the digital age, NEC retains a balance sheet that provides further flexibility into the future. From the results’ perspective:

  • Growth in the Video On Demand platforms and Metro Media offset the cyclical issues facing the Broadcasting and Domain businesses;
  • On a Pro Forma basis, this resulted in a 10% increase in combined Group EBITDA ($424 million) for the year, on broadly flat revenues of $2.3 billion, for the year to June 2019;
  • EBITDA growth was driven by strong performances from Metro Media, 9Now, Stan and reduced corporate costs, and was achieved despite the headwinds of a particularly difficult advertising and housing markets;
  • Group net profit after tax, pre-specific items, was $198 million for the year, which was up 16% on FY18;
  • NEC reported favourable specific items of $29 million after tax, of which $27 million were cash costs associated with the merger;
  • The company paid a 5-cent final dividend, taking full year dividends to 10 cps, equating to a dividend yield of ~5%, fully franked.

Current Trading Facts and OutlookPro Forma Combined Group Results (Source: NEC’s Presentation)

Mr Peter believes that Australians are watching more television than ever before and estimates the total market for video-based ad revenues to be over $5 billion. The company has invested in technology and has the data capabilities to compete in the broader digital video market, though it needs to accelerate the growth in its digital audience scale.

Currently, the weakness in consumer sentiment in Australia has manifested itself in weak trading conditions for several consumer facing businesses. The company is expecting to report low single digit growth in FY20 Pro Forma Group EBITDA, pre the impact of AASB16.

Jumbo Interactive Enters Into Conditional SPP To Acquire Gatherwell Limited

Operator of the popular website www.ozlotteries.com in Australia, under agreements with Tabcorp Holdings Limited (ASX: TAH), Jumbo Interactive Limited (ASX: JIN) is a proven player of the lottery markets, known for its innovative technology and internet marketing initiatives. The company entered the lottery SaaS market, signing its first client in November 2018 to use its “Powered by Jumbo” (PBJ) lottery software.

On 12 November 2019, the company notified regarding entering into a conditional Share Purchase Agreement to acquire UK-based lottery manager Gatherwell Limited for ~$9.1 million in cash. The acquisition price is based on a forward-looking Price/Net Profit before Tax multiple of ~6.2x to ~7.8x (as at 30 June 2021).

Gatherwell is a private limited liability corporation, founded in 2013 and located in Oxford. It has been profitable for the past three years to 31 December 2018 and has a similar entrepreneurial and innovative culture and operating leverage in the business as JIN.

Subject to the UK Gambling Commission’s approval on the change of control, JIN expects a revert by 31 January 2020, and regards the acquisition to be an important step in building the SaaS PBJ business segment, while accomplishing the $1 billion of ticket sales vision by 2022. The acquisition, deemed to be a win-win for both JIN and Gatherwell, would also increase JIN’s revenue and profits, and open opportunities in the UK charity lotteries industry.

ECS Botanics Bags Manufacture Licence For Medicinal Cannabis

An agribusiness and hemp food company, ECS Botanics Holdings Ltd (ASX: ECS) has its main operations conducted in Tasmania. The Company has the necessary licenses to grow, produce and distribute industrial hemp in Tasmania and has a grower license in Queensland. It also holds import and export licenses with the Australian Federal Government’s Office of Drug Control and is a licensed manufacturer of medicinal cannabis, though its cultivation of medicinal cannabis application is currently pending with the Office of Drug Control.

Adding on to its existing portfolio of licences, the company notified on 12 November 2019 that it had finally been granted a Manufacture Licence (valid from 8 November 2019 to 8 November 2020) by the Office of Drug Control for medicinal cannabis operations at its site in Tasmania:

  • The licence, in addition to subsequent permits, allows the company to undertake authorised activities for specified drugs, once the development of its proposed medicinal cannabis facility at the site concludes;
  • The licence authorises ECS to undertake the manufacture of a drug in accordance with one or more manufacture permits;
  • It authorises ECS to conduct activities relating to such manufacture, including (but not limited to) the supply of the drug, the packaging, transport, storage, possession and control of the drug and the disposal or destruction of the drug.

The company has engaged PharmOut, a leading international medicinal cannabis consultancy group, to assist as a feasibility study is delivered in respect of the facility.

Stock Performance

The below table illustrates the stock performance and YTD returns of the discussed stocks, on 13 November 2019 (AEST 12:45 PM): ECS Botanics Bags


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