Media Stocks in Voluntary Suspension and FY20 Earnings Guidance withdrawal amid COVID-19 outbreak

  • Mar 25, 2020
  • Team Kalkine
Media Stocks in Voluntary Suspension and FY20 Earnings Guidance withdrawal amid COVID-19 outbreak

The media industry in Australia comprising of movies, television, print and digital media and the music industry is facing the prospect of continuation of cost cutting and sector consolidation due to COVID-19 pandemic. Further, the advertising spend has been significantly reduced& cancellations to advertising bookings are adding more pressure to the sector as they are significant source of revenue. This has led to massive short selling of the sector. As a result, the federal government may give temporary relief to the sector after providing reduction in broadcasting spectrum licence fees and local content obligations.

Major commercial networks like Nine Entertainment Co and Seven West Media pays approximately $10 million in a year for spectrum cost. This fee however is based on a range of factors like how much spectrum the company has and its strength.

Moreover, the government has asked the Australian Communications and Media Authority to give the industry some potential relief in regulatory areas like content quotas, that requires the broadcasters to pay certain amount for airing specific Australian content, drama and children's programming.

Let us now look at the updates from the media stocks- SXL, OML, NEC, SWM

Southern Cross Media Group Ltd(ASX: SXL)

Stock in Voluntary Suspension pending an announcement

Southern Cross Media Group Ltd (ASX: SXL), formerly known as Macquarie Media Group, is one of Australia's major diversified media company. SXL operates regional radio and television stations in Australia, and also is into publishing of community newspapers in the United States.

On 25 March 2020, SXl updated the market is suspended from quotation instantly as per the Listing Rule 17.2, at its request, pending the release of a declaration concerning the effect of Coronavirus on its business.

While on 23 March 2020, the Company’s stock was put in trading halt till 25 March 2020, at the request of SXL.SXLplans to give an important announcement to the investors, probably on theimpact of COVID-19. The announcement may pertain to the steps taken by the company to combat the crisis.

Moreover, for the first half of 2020, SXL reported 8.2% fall in the group revenue to $308.1 million on the back of a broad advertising contraction that has affected all markets and segments, including Audio and Television. Southern Cross has posted the Statutory EBITDA of $67.5m, which is affected by $8.2m non-cash benefit due to adoption of AASB16 (Leases) by the company and one-off restructure costs of $2.9m. In addition, during 1H 2020, the company’s net debt had risen by 12% on the back of debt funded acquisition of Redwave Media.

 

1H FY 20 Financial Performance (Source: Company’s Report)

1H FY 20 Financial Performance (Source: Company’s Report)

 

SXL last traded at a price of $0.165 on 23 March 2020. The Company has a market capitalisation of $126.89 million and ~769.01 million shares outstanding.

oOh!Media Ltd

Suspended from official quotation due to announcement of proposed capital raising:

oOh!Media Ltd (ASX: OML), a leading company for Out of Home advertising in Australia and New Zealand that has the network in more than 30000 locations through billboards, bus shelters, online ad panels, digital signs, etc.

As per its market update on 24 March 2020, OML has been suspended from quotation immediately as per the Listing Rule 17.2. This is taken as per the request of OML, as the Company is going to announce regarding a proposed capital raising. The company had earlier entered a trading halt till 24 March 2020 to decide whether an emergency capital raise is required. The company in the media sector was among the first ones to withdraw its full year guidance due to effects of COVID-19. OML has re-arranged its capital spending and projected to be significantly lower than the bottom side of the guidance which fell between $60-$70 mn that was announced previously.

OML last traded on 19 March 2020, at a price of $0.840 and has outstanding shares of ~242.39 million. OML has given a return of -77.72 percent.

Nine Entertainment Co Holdings Ltd

Withdrawn FY 20 Earnings Guidance:

Nine Entertainment Co Holdings Ltd (ASX: NEC), a leading company that is into media catering to TV, radio, newspaper publications and digital media related with News, Sport, Lifestyle and Entertainment. The company also operates renowned streaming service Stan.

NEC has recently withdrawn its FY 20 earnings guidance. The Company earlier for FY 20, had projected Pro Forma Group EBITDA to post low single digit growth driven by the fall in Metro FTA market in mid-single digits. Now the Company’s March quarter FTA ad revenues are about flat and due to fast spread of COVID-19, NEC is anticipating uncertain business environment, which has led the company to withdraw it profit guidance for fiscal 2020. 

On the other hand, the Company has recently refinanced its corporate debt facilities. As per the new facilities, there will be equal 3- and 4-yearrevolving cash advance facilities of aggregate $545 million and a one year working capital facility of $80 million. The company will be paying the fully franked interim dividend of 5cents on April 20, 2020.

On 25 March 2020, NEC was trading at $0.930, rising up by 8.14 % (at AEDT 3:25 PM).

Seven West Media Ltd(ASX: SWM)

Withdrew FY20 Earnings Guidance:

Seven West Media Ltd (ASX: SWM), formed after acquiring West Australian Newspapers Holdings Limited (WAN) provides free to air television broadcasting, publishing of newspaper and magazine, online and radio services, a subscription video on demand service (Presto TV) & and RED Live.

On March 24, 2020, the Companynotified on the withdrawal of its FY 20 earnings guidance on the back of a significant reduction in advertising market activity, and also due to the suspension or postponement of productions and events. The Company does not see sufficient visibility of earnings from future advertising bookings.

Moreover, the AFL has suspended all games till the end of May 2020. The International Olympic Committee’s (IOC) Tokyo 2020 may proceed as per schedule currently, but IOC is also exploring a postponement scenario, and the Australian Olympic Committee and other national bodies are confident of change in date. Additionally, the Company is working to deal with its debt that has maturities in November 2021 and 2022.

On 25 March 2020, SWM was trading flat at $0.067 at AEDT 3:33 PM. In the last one-month duration, SWM has given a negative return of 62.78%.


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