Nine Entertainment (NEC) declared a special dividend of AUD 0.49 per share on Aug. 27, 2025, as part of the distribution of proceeds from the sale of the 60% stake in Domain. On Sept. 11, 2025, Nine shares went ex this special dividend, which will be paid on Sept. 26, 2025 to Nine shareholders.

We adjust our fair value estimate for no-moat-rated Nine to AUD 2.20 per share, from AUD 2.70 previously, to reflect the imminent AUD 0.49 special dividend per share payment. Our earnings forecasts are unchanged.

The special dividend distribution to shareholders takes up less than 60% of the proceeds from the sale of Nine’s 60% stake in Domain. With net cash post the Domain stake and special dividend payment, investor attention is likely to turn to further capital deployment.

However, with shares notably below our intrinsic assessment, we urge Nine to maintain operating focus, rather than pondering strategic options. The fundamentals are solid and the transition to a digital-centric model is working. Nine should stay the course and better monetise its undervalued assets.

Strong progress on factors within Nine’s control

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.

Through Nine Network, Nine offers exposure to the AUD 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).

Cash from legacy assets driving growth in new-age properties

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 AUD 1.4 billion in net cash proceeds is set to occupy investors’ minds.

Even after distributing AUD 0.49 per share in fully franked special dividends, Nine would have almost AUD 700 million from the Domain sale. It would wipe out Nine’s AUD 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.

We think shares look undervalued

Our fair value estimate is AUD 2.20 per share.

This implies a forward fiscal year enterprise value/EBITDA of 8.0 times, and a dividend yield of 2.2%. We forecast average revenue growth of -3.4% per year for the next three years, mostly due to the sale of Domain.

We expect group EBITDA margin to average 17.3% during the next three years, down from the 20.0% achieved during the past three years, due to the impact of the cyclical downturn and the sale of Domain.

Beyond the next three years, our top-line, midcycle growth assumption is in low-single-digit percentage terms. We project the group EBITDA margin to settle at 21.2%.

Nine Entertainment Co. (NEC)

  • Moat rating: No Moat
  • Fair Value estimate: $2.20 per share
  • Share price September 11: $1.09
  • Star rating: ★★★★★

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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.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

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.