Jarden said the NZME business remained robust. Photo / NZME
Jarden said the NZME business remained robust. Photo / NZME
Investment firm Jarden has upgraded NZME shares to a "buy" based on the media company's strong momentum in digital subscriptions and strong digital advertising revenues.
While the Covid-19 pandemic had brought forward a decline in print advertising, print subscription circulation remains robust and NZME's publishing franchise is in "robust health", analysts Arie Dekker and Grant Lowe said in a research note today.
They noted the NZ Herald was now reaching over half of New Zealand every week, had achieved readership growth for 15 straight months and was approaching a year as New Zealand's number one digital news website.
Meanwhile, the Herald's premium subscription base had grown to more than 110,000 New Zealanders.
"While NZME was prevented from merging with Stuff, the benefits of a stronger underlying business are coming through," the Jarden analysts said.
"Despite structural pressures still evident in print advertising (now less than one third of publishing revenue), we expect publishing to record a third year of broadly flat earnings which has come without NZME having to do much on the cost front on content, enabling it to maintain quality."
The analysts noted that while the advertising market remained soft, radio remained resilient and NZME's OneRoof real estate portal was on track to double digital advertising revenue in 2021.
"We believe the market is undervaluing the strength of NZME's publishing franchise, the resilience of the radio business and the optionality in OneRoof. Debt is no longer an issue and a sale of GrabOne would likely see a net cash position at year-end."
Jarden sees a return to dividends this financial year and also the prospect of a share buyback if the stock continues to trade at current levels.
NZME shares were up 4 per cent in morning trading before easing back to Wednesday's closing price of 75c by mid-afternoon.
Jarden has lifted its 12-month target price to $1.04, up from 99c, on a "slightly more positive long-term view".
NZME chief executive Michael Boggs and chair Barbara Chapman (far right) at a shareholders meeting in Auckland. Photo / Dean Purcell
The upgrade follows on from the strong NZME showing at the 2021 edition of the Voyager Media Awards, where the Herald won a rare digital double by claiming the Website of the Year and App of the Year accolades.
In February, the company reported annual operating earnings of $67.3 million and signalled a return to dividends in the second half of this financial year after repaying $41m of debt.
Statutory profit of $14.2m compared to a net loss of $165.2m in 2019 when it suffered impairments to intangible assets.
The operating result was a 3 per cent increase on the previous year and included $8.6m accessed from Government Covid-19 wage subsidies.
