Since the $0.49 per share special dividend in September 2025, shares in Nine (ASX:NEC) are up 5%, compared with a 1% rise in the ASX 200. Near-term earnings are tracking our expectations in the face of advertising weakness, and management is doing its utmost to highlight Nine’s asset values.

Why it matters: Unfortunately, Nine’s stock price remains in the doldrums. No amount of deep dives into its solid business and balance sheet fundamentals has been able to attract meaningful investor interest.

  • Resilience of group revenue, with a six-year compound average growth rate of 2% driven by streaming and digital, is falling on deaf ears. Nine’s potential to lift its 16% share of the $12 billion video market is being dismissed. Digital transformation of the publishing unit remains underappreciated.
  • Even a compelling sum-of-parts valuation isn’t enough. For instance, the Australian Financial Review alone may be worth AUD 500 million—almost 30% of Nine’s current market value—given its comparable digital and margin metrics to high-multiple Dow Jones and New York Times.

The bottom line: Given investor apathy, the only near-term way for Nine to close its significant discount to our $2.20 fair value estimate is cost-cutting. $60 million was cut in fiscal 2025, and the target for the next two years has been lifted to $100 million, from $90 million.

  • We are counting on management to deliver these cost savings to meet our five-year EBITDA CAGR forecast of 1.6%. If Nine is serious about better content/data monetization, distribution integration, and leveraging technology/artificial intelligence, delivery of the cost-out target is the minimum starting point.
  • Southern Cross (after the recent merger with Seven West) is also ramping up its cost-cutting drive. Ten Network, with a sub-20% share of the TV revenue market, is perennially penny-pinching. As such, a so-called war for talent and content will no longer be tolerated as an excuse for industry cost growth by investors.

Nine’s first priority must be cost-cutting

Amid economic uncertainties, we are encouraged by Nine Entertainment’s progress on factors within its control. The balance sheet is in net cash position after the Domain sale, and TV ratings, advertising market shares, and pricing are strong than ever. Critically, management is still restructuring the cost base and improving operating efficiency.

Through Nine Network, Nine offers exposure to the $3.2-billion Australian free-to-air television advertising market. This media segment has remained flat during the past decade, after enjoying growth of around 6% in the preceding decade. The slowing growth has been caused by proliferating digital media alternatives, rapidly changing entertainment consumption habits, and broadband usage. Indeed, the structural headwinds have been such that the free-to-air TV industry’s share of the Australian advertising pie has slumped from more than 35% in the mid-2000s to just over 20% now, as advertisers follow viewers to digital media platforms.

The key investment consideration comes down to Nine Network’s EBITDA margin outlook. This is important in the face of increasing competition for viewers and for content (from digital upstarts and incumbent television broadcasters).

In December 2018, Nine merged with Fairfax Media to increase its scale to better compete against digital companies. Cash flows from legacy free-to-air TV (Nine) and media (Metropolitan Media, Radio) units are being reinvested to drive growth of new-age digital properties (9Now, Stan, Domain). The still-effective promotional power of the legacy divisions is also being leveraged to drive awareness and traffic to these new digital units.

Nine’s 60% shareholding in Domain was divested in August 2025. Allocation of the potential $1.4 billion in net cash proceeds is set to occupy investors’ minds. Even after distributing $0.49 per share in fully franked special dividends, Nine would have almost $700 million from the Domain sale. It would wipe out Nine’s $451 million net debt.

Bulls say

  • Nine Entertainment commands a strong position in the Australian free-to-air television industry, with number-two ratings and revenue share positions.
  • The company generates solid free cash flow and boasts a strong balance sheet, key attributes that allow management the flexibility to invest in programming while engaging in capital-management initiatives.

Bears say

  • Nine Entertainment’s recent increase in ratings and revenue share has come at the expense of Ten Network. There is a risk of mean-reversion as Ten Network recovers from its current all-time low position.
  • The free-to-air television industry is structurally challenged, with proliferating entertainment choices for consumers.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

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Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.