NZME Ltd [NZX:NZM] [ASX:NZM] is the largest media owner in New Zealand. It has a suite of iconic media properties, such as Newstalk ZB and the New Zealand Herald.

The past few years have been a choppy ride for shareholders. Cut dividends. And a plunging share price.

Vying to expand into the growing digital media space, the print legacy business poses many challenges. It’s also been a perfect storm, with the option of a Stuff merger no longer on the table. While global competitors continue to move into the online local news space.

But NZME still has some valuable assets. Strategic media experience. And at least one fund manager could be seeing opportunity and potential.

 

Why has the [NZX:NZM] [ASX:NZM] share price risen?

 

NZME is preparing to announce its half-year results on Tuesday 25 August. Judging by recent share price trends, investors have been expecting the worst.

But these may exceed such negative expectations. Lockdowns have encouraged more consumption of online news and radio. Not less. And we may well see Herald Premium subscriptions rising again. Alongside Newstalk ZB ratings continuing to lead.

There are some jewels still in this crown. Though there are also daggers, not least COVID pain in advertising spend to consider.

Auscap Asset Management describes itself as a ‘value based long/short equities investment manager.’ It is one of the largest holders of NZME shares, with a position of 30m shares — or 15.26% of the company — as disclosed on 18 August.

In the manager’s latest August newsletter, they explain their investment strategy.

‘…Taking a medium term time horizon to invest in some of the best companies in the market which should benefit from positive long term economic prospects. We are confident that the companies in which we are invested are well positioned to recover and grow over the medium term.’

 

Where could [NZX:NZM] [ASX:NZM] go from here?

 

Further growth in the NZME share price — and hopeful return of dividends — now depends on recovery in the wider economy. In particular, advertising spend.

  • Fortunately, the business is expanding its revenue model with Herald Premium subscriptions and growing inroads into digital classifieds via OneRoof, Drive, and GrabOne.
  • Back in 2019, while it was still early days for Herald Premium, the full-year results showed 21,000 paid subscribers.
  • I will be looking for increase in this next reporting period.

There is value in NZME’s portfolio of assets. Though this sector is challenging. It remains to be seen how the company can transform into a profitable digital business. And manage the bleed of print revenue.

There is potential. You only need to look at how Trade Me grew on the back of a purely online model. Trade Me still has a significant share of the key market of online classifieds. I’d like to see NZME take more of that share and boost their growth.

 

Regards,

Simon Angelo

Editor, Wealth Morning

PS: You may not realise it, but with up to 50,000 views a month, Wealth Morning has become New Zealand’s leading specialist investment news site. We also have a Premium option with live investment analysis and opportunities beyond the radar. I encourage you to check it out here:

Already a Member? Sign In Here