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AUSTRALIA

Fig 1 A/NZ Media Coverage

Ticker Recc. Price target Close Price REA Outperform $63.50 $55.22 CAR Outperform $13.20 $11.20 SEK Outperform $16.50 $15.13 NEC Outperform $1.25 $1.01 APN Outperform $3.35 $2.67 NWS Outperform $20.40 $17.11 SXL Neutral $1.30 $1.29 SWM Neutral $0.80 $0.68 TEN Neutral $1.00 $0.55 FXJ Restricted Restricted $0.95 OML Restricted Restricted $4.43

Source: FactSet, Macquarie Research, March 2017, prices as of 8 March

Fig 2 EPS changes

FY17 FY18 FY19

NEC -2.4% -2.1% -2.0% REA +0.4% +0.6% +0.5%

Source: Macquarie Research, March 2017

Fig 3 Recommendation changes

Current Previous

NEC Outperform Neutral


9 March 2017 Macquarie Securities (Australia) Limited

Media sector Core strength Event

We review the Media sector in the wake of the recently completed reporting

season. Key picks remain concentrated in the Online Classifieds space: REA,

CAR and SEEK, as well as APN News & Media. In addition, we upgrade NEC

to Outperform primarily on improved early-season ratings performance.

Impact

Online marketplaces - Structural yield improvement for the “core” bodes

well for medium-term growth. Volume trends mixed: At a high level, SEK,

CAR, REA and Domain achieved 10%, 7%, 21% and 19% growth in yields for

their respective core revenue segments in 1H17. We see this as a key

reporting-season takeaway that bodes very well for medium-term growth.

Separately, job ad volumes are tracking well (up 3% in 1H17 and improved in

January), while real estate listings are more subdued. We expect a stable

volume outcome in 2H for RE listings.

Follow the margin – it points to strong share prices: Margin improvement

has been a key driver of share prices for Online names historically. REA has

flagged high incremental margins for 2H17, which should be a positive and

could still surprise on the upside. CAR broadly held core margins steady,

although its Group margin has been heavily diluted by acquisitions and

Stratton’s decline. SEK Domestic saw some margin dilution, but still delivered

EBITDA growth of 9.7% given strong revenue trends.

Key adjacencies/investments disappointed: REA’s Asian operations were

a disappointment in the half due to re-investment, competition and macro

headwinds. Stratton’s business model has come under significant pressure

due to the competition regulator scrutinising a key supplier. SEEK has exited

the bulk of its core Learning operations. All three businesses dragged on

reported earnings and growth rates in the half, but should be less problematic

going forward.

TV ratings - Nine doing better in early ratings trends: Nine has bounced in

2017 after a poor start to 2016, which bodes well for reclaiming revenue

market share later in the year.

Licence Fee cuts on the table for May budget: Scope exists for licence fee

cuts to be part of the May budget. Nine would get the largest relative EPS

uplift from any reduction in fees, followed by SWM and SXL.

Outlook

Re-iterate OP on REA, CAR and SEK. All three are showing strong

momentum in their core business drivers, are positioned for continued growth

over the next few years, and are trading at a discount to 3-yr rolling average

PE Rels. CAR is the cheapest of the three, REA will see the best operating

momentum near-term, while SEK has, in our view, been establishing a strong

platform for longer-term value creation subject to execution.

Upgrade NEC to Outperform. Improved early-season ratings set a good

platform for monetisation as the year progresses and an offset to industry

headwinds, while the potential for licence fee cuts offers further upside

optionality. Underlying cash conversion will be below par over the next few

years as NEC exits WB, but this is offset by other working capital adjustments

and the Willoughby sale, suggesting a high percentage of earnings will still be

distributed to shareholders via dividends. TP increased 15cps to $1.25/sh.

http://www.macquarie.com/research/disclosures

Macquarie Wealth Management Media sector

9 March 2017 2

Overview

At a high level, we thought it was a very strong reporting season for the Online names (SEK, CAR,

REA), as they delivered double digit revenue growth in core business segments, and converted

this to another half of good earnings upside in those operations. Most critically, improvement in

yields looks structural.

This should give investors increased confidence in the medium-term outlook for these names and

underpin earnings multiples reflective of this.

Analysis in this note highlights a few key trends and takeaways:

As mentioned, Domestic online marketplace verticals are driving significant revenue growth

from yield, and importantly, by non-price factors such as product mix, and prominence

products.

Against that, volume trends are fairly mixed. Job ad volume data is stable and encouraging.

House listing volumes still appear subdued relative to historical levels. Inquiry volumes were

a positive for CAR in the December half, however forward visibility of this metric is limited.

Our analysis shows incremental margins can be meaningful share price drivers over time.

These have broadly stabilised at SEK, and are positioned to grow in 2H17 for REA. CAR’s

margins are being diluted at a Group level but remain stable for its Domestic Core business.

While valuation metrics for the online names are not cheap in nominal terms, all three are

trading below 3-year rolling PE Rel levels. Coupled with a robust earnings outlook into FY18

for all three, we see further share price upside.

We have upgraded our REA valuation from $60/sh to $63.50/sh following modelling

adjustments. Our CAR and SEK target prices are unchanged at $16.50 and $13.20

respectively.

For traditional media, we expect a continuation of trend for segment growth in 2H17, albeit at

more subdued levels. We see TV ad markets down 2% in the June half (-4.5% in 1H), Out of

Home up 5% (+13.0%), and Radio +3.0% (+1.5%).

Despite TV headwinds continuing, we upgrade NEC to Outperform. It has had a better-than-

expected start to the TV ratings season, which historically has been a leading indicator to

share price performance. Further upside may exist if TV licence fees are cut as part of the

May budget. We have upgraded our target price to $1.25/sh from $1.10/sh, offering a TSR of

33.1%.

Licence fee cuts should benefit all TV and radio operators if they come through. The

greatest positive leverage to any changes is with NEC, followed by SWM and SXL.

Fig 4 A/NZ Media coverage

Currency Ticker Macq Share Target Upside/ Yield TSR

Recc. Price (lcy) Price (lcy) Downside FY1

APN News & Media A$ APN Outperform $2.67 $3.35 25.5% 3.4% 28.9% Carsales A$ CAR Outperform $11.20 $13.20 17.9% 3.5% 21.4% Fairfax Media A$ FXJ Restricted $0.95 Restricted Restricted 4.2% Restricted News Corp A$ NWS Outperform $17.11 $20.40 19.2% 1.6% 20.8% Nine Entertainment Co A$ NEC Outperform $1.01 $1.25 24.4% 8.7% 33.1% oOh!media A$ OML Restricted $4.43 Restricted Restricted 3.6% Restricted REA Group A$ REA Outperform $55.22 $63.50 15.0% 1.6% 16.6% SEEK Limited A$ SEK Outperform $15.13 $16.50 9.1% 2.8% 11.9% Seven West Media A$ SWM Neutral $0.68 $0.80 17.6% 7.2% 24.9% Southern Cross A$ SXL Neutral $1.29 $1.30 0.8% 6.0% 6.8% TEN Network Holdings A$ TEN Neutral $0.55 $1.00 83.5% -% 83.5%

Note: Fairfax Media and oOh!media currently on research restrictions. Source: Macquarie Research. Data at 8 March 2017.


9 March 2017 3

Yield trends underpin medium-term growth profile for Online names

In our view, it was a strong reporting season for the online names.

Most critically, all four online names delivered strong core business revenue outcomes, while SEK,

CAR and REA delivered strong EBITDA growth outcomes from that base. This is summarised in

Figs 5-7 below.

Fig 5 SEEK: Domestic revenue/EBITDA growth

Fig 6 CAR: Core Domestic revenue/EBITDA growth

Source: Company source, Macquarie Research, March 2017 Source: Company source, Macquarie Research, March 2017

Fig 7 REA: Australia revenue/EBITDA growth

Fig 8 Domain: Digital revenue/EBITDA growth


Notably, volume growth for all these verticals was either subdued (SEEK, CAR) or a substantial

headwind to growth (REA, Domain). The highlight, in our view, was the level of yield growth being

generated by these operators from a combination of price rises, improving product mix, and

increased take-up of prominence products (refer Fig 9).

The importance of this is that it means these online vertical marketplace operators have scope to

drive revenue growth in their businesses outside of being dependent of structural or cyclical

volume growth.

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9 March 2017 4

Fig 9 Core business revenue growth is now primarily being driven by yield

1H17 revenue growth

Volume Yield -Price

Yield -Other

Drivers of "Other" category

SEEK: Domestic +13% +3% +3% +7% Other includes 2% mix shift and 5% from growth in prominence

products. CAR: Dealer revenues +10% +3% +4% +3% Other is primarily take-up of prominence products. REA: Resi depth revenues +14% -7% ----- +21% ----- Other includes price rises and improving mix/depth product adoption Domain: Depth revenues +12% -7%* ----- +19% ----- Other includes price rises and improving mix/depth product adoption

*Note: National decline was ~7%. Domain revenues are more heavily skewed to NSW and Victorian markets which saw larger declines than the national average.

Source: Company sources, Macquarie Research, March 2017

Fig 10 Breakdown of SEEK Domestic revenue growth drivers


Keeping track of volumes: Jobs still solid, property still soft

Job ad volumes remain robust, with encouraging trends toward the end of the year, even if they

are not the most active hiring months for many businesses. WA looks to have stabilised and about

to inflect back to ad volume growth, while trends in Queensland also appear to have improved.

The key NSW and Victorian markets remain positive.

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Structural shift away from dependency on pure Volume and Price as drivers


9 March 2017 5

Fig 11 SEEK Employment Index (% ch vs pcp)

Fig 12 SEEK Employment Index (% ch vs pcp)


For Real Estate listings, near-term trends are hard to read following a shift in methodology by

CoreLogic, which may be impacting growth rates. Domain noted volume declines of ~7% in 1H17

and our channel checks suggest January ended up either slightly down or flat.

We expect that listing volumes will be robust across the half. From a seasonal perspective, a later

Easter may have impacted January volumes, but should support better trends for February and

March. In addition, comps are very weak for May and June given the Election impact last year. We

assume flat volumes for the current half.

Fig 13 New listing volumes were weaker in the December half…

Fig 14 New listing volumes were weaker in the December half…

Source: CoreLogic, Macquarie Research, March 2017 Source: CoreLogic, Macquarie Research, March 2017

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9 March 2017 6

Fig 15 … particularly in key East Coast markets

Fig 16 … particularly in key East cost markets

Source: CoreLogic, Macquarie Research, March 2017 Source: CoreLogic, Macquarie Research, March 2017

Following the incremental margin

Post reporting-season, we thought it was worth looking into the performance and outlook of

incremental EBITDA margins (i.e. the % of incremental revenue that is converted to EBITDA in a

period).

This is an important metric, as sentiment around margins has historically been an

important driver of share price performance for Online names (refer Figs 17-19). For

example, a sharp pick-up in incremental margins for SEEK in CY2014 led to a near-doubling of its

share price, however when investment levels unexpectedly picked up and margins retracted in

FY15, SEEK’s shares fell 28%. Similarly for Carsales, its share price has not progressed

materially since flagging structural margin pressure in its business at its FY14 result. There are

some similar trends at REA, although broadly speaking it has delivered fairly consistent

incremental margins until recently.

Key takeaways from reporting season:

SEEK’s incremental margin of 44.1% was below its existing business margin of ~55%. After

a period of catch up spend, SEEK has – in the last 2 halves – managed to offset higher

investment with revenue delivery, and hence EBITDA still grew by 9.7% for the segment.

The improving yield story is a part of this, and if it can maintain this dynamic, it is well

positioned to sustain growth going forward. We expect yields to hold up, supporting this

dynamic.

REA has disappointed in the two most recent halves with respect to incremental margin

delivery. Some of this is timing related, but it is also impacted by weaker than expected

volumes. REA manages its business to drive margin expansion every year (“positive jaws”),

and has pulled back on cost growth to achieve this this year. Combined with some timing

impacts around marketing spend, REA is well positioned for strong incremental margin

delivery in 2H17 and to take strong momentum into FY18, which bodes well for the stock.

CAR’s margin story is a bit more nuanced. Its expansion into new verticals is necessarily

dilutive to margins, as AutoInspect, Tyresales and Stratton all operate at very low margins

relative to the ~61% Domestic Core margin. Stratton’s operational issues have compounded

that and new International businesses are also dilutive at a Group level. Top line growth

from these areas will continue to exceed Domestic growth, and hence Group margins will

remain under pressure. Against that, the Domestic Core business margin has been fairly

stable, as shown in Fig 20. A slightly softer outcome in 1H17 needs to be balanced against

the 1H16 result, suggesting it is partly a timing factor.

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9 March 2017 7

Implications: REA looks ready to convert a large part of 2H revenue growth to EBITDA, which will

support earnings and also sentiment ahead of the next result. SEEK's margins have stabilised, but

can be volatile as it varies its investment rate. CAR will remain mixed. While lower margin revenue

streams will continue to grow faster than the core, the impact on the business should moderate on

the assumption (a) that margins improve in these operations to some extent as they scale, and (b)

Stratton declines moderate.

Fig 17 SEK (Domestic): Significant movement in share price has followed shifts in incremental EBITDA margin

Fig 18 REA (Domestic): About to deliver a step-up in incremental margins in 2H


Fig 19 CAR (Domestic): CAR share price has “stalled” since lower margins were flagged at the FY14 result

Fig 20 CAR (Domestic Core): …Even though Domestic Core margins have remained very healthy throughout


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SEK shares fell from $18.54 high to $13.40 post these two results

SEK shares rose from $9.20 to $17.47 post these two results

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bounce in 2H17?

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9 March 2017 8

We see valuation upside for each of SEK, REA and CAR

We see valuation upside for each of SEK, REA and CAR at current levels, based on our

DCF/SOTP analysis. From a multiples perspective, all three are well placed for continued core

earnings growth into FY18, which should support stock price growth as the market increases focus

on these multiples over the next few months. REA might have the most potential of the three for

near-term multiple expansion given the likely improvement in margins into 2H.

Against this backdrop, and also reflecting minor modelling adjustments, we have raised our REA

target price from $60 to $63.50/sh. Our SEK and CAR target prices are unchanged.

Fig 21 A/NZ media comps

Ticker Market Macq Share Target EV/EBITDA PER Div Yield

Cap (lcy, m) Recc. Price (lcy) Price (lcy) FY1 FY2 FY1 FY2 FY1 FY2

TV/Radio Seven West Media SWM $1,025 Neutral $0.68 $0.80 5.9x 5.8x 6.9x 6.8x 7.2% 7.3% Nine Entertainment Co NEC $915 Outperform $1.01 $1.25 6.4x 5.7x 8.9x 8.5x 8.7% 9.4% TEN Network Holdings TEN $209 Neutral $0.55 $1.00 174.5x -38.4x nmf nmf 0.0% 0.0% Southern Cross Media SXL $969 Neutral $1.29 $1.30 7.5x 7.3x 10.8x 10.6x 6.0% 6.6% APN News & Media APN $790 Outperform $2.67 $3.35 7.1x 6.5x 11.7x 11.1x 3.4% 3.6% Sky Television SKT $1,444 Neutral $3.73 $4.00 6.1x 6.3x 13.1x 13.3x 8.0% 6.4% Average: TV/Radio (ex-TEN) 6.6x 6.3x 10.3x 10.1x 6.7% 6.7% Publishing/Diversified News Corp (US) NWSA $7,588 Outperform $12.66 $15.10 6.2x 5.2x 29.2x 21.0x 1.6% 1.6% Fairfax Media FXJ $2,127 Restricted $0.95 Restricted 8.7x 8.5x 14.9x 15.3x 4.2% 4.2% Average: Publishing/Diversified 7.4x 6.8x 22.1x 18.2x 2.9% 2.9% Internet SEEK Limited SEK $5,294 Outperform $15.13 $16.50 15.1x 13.5x 26.0x 24.2x 2.8% 2.9% Carsales CAR $2,685 Outperform $11.20 $13.20 16.1x 15.1x 23.4x 21.7x 3.5% 3.8% REA Group REA $7,256 Outperform $55.22 $63.50 19.0x 15.7x 30.8x 24.6x 1.6% 2.0% TradeMe TME $2,129 Neutral $5.36 $5.30 14.5x 13.3x 23.3x 21.2x 3.3% 3.8% Average: Internet 16.2x 14.4x 25.9x 22.9x 2.8% 3.1% Out of home oOh!media OML $698 Restricted $4.43 Restricted 9.1x 8.6x 15.9x 15.5x 3.6% 3.7% APN Outdoor* APO $933 n/a $5.60 n/a 10.5x 9.5x 16.4x 14.7x 3.6% 4.0% Average: Out of home 9.8x 9.0x 16.2x 15.1x 3.6% 3.8% Average - A/NZ Media (ex-TEN) 10.2x 9.3x 17.8x 16.0x 4.4% 4.6% Median - A/NZ Media (ex-TEN) 8.7x 8.5x 15.9x 15.3x 3.6% 3.8%

*APN Outdoor not covered by Macquarie; data based on Bloomberg consensus. Fairfax Media and oOh!media currently on research restrictions. TME covered by Daniel Frost. SKT covered by Warren Doak. Source: Macquarie Research, Bloomberg. Data at 8 March 2017.

Fig 22 SEK valuation overview

Headline Seek Seek share Multiple Valuation Value per

A$m FY17e EBITDA

Share (%) FY17 EBITDA x A$m share ($A)

Domestic Employment 196.8 100% 196.8 17.0 3,345.2 $9.48 Zhaopin 86.6 60% 52.0 17.0 884.6 $2.51 Early stage -21.0 100% -21.0 nmf 25.0 $0.07 Brasil Online 29.6 100% 29.6 12.0 355.2 $1.01 SEEK Asia 72.0 86% 62.1 18.0 1,117.7 $3.17 OCC Mexico 7.1 98% 7.0 18.0 125.4 $0.36 International overheads -4.2 100% -4.2 10.0 -42.0 -$0.12 Sub-total: Consolidated 366.9 322.3 18.0 5,811.1 $16.46 Other investments 416.0 $1.18 Target enterprise value 6,227.1 $17.64 Net debt -364.1 -$1.03 Adjustments to net debt balance -95.8 -$0.27 Adjusted net debt -459.9 -$1.30 Equity value 5,767.3 $16.34 Target price $16.50



9 March 2017 9

Macquarie vs Consensus

To give additional context, we do note in Figs 23 and 24 that our estimates are modestly ahead of

consensus for CAR and SEK (mostly for FY18), while broadly in line with consensus for REA. In

the case of SEK’s EPS, this could be exaggerated by the treatment of amortisation of PPA, which

we remove from adjusted earnings.

For NEC, we do see upside to consensus earnings for FY18 and FY19 based on our current

forecasts.

Fig 23 EBITDA estimates: Consensus vs Macquarie

EBITDA FY1 FY1 FY1 FY2 FY2 FY2 FY3 FY3 FY3

Macq Consensus Var Macq Consensus Var Macq Consensus Var APN 132.9 130.8 1.6% 143.2 138.6 3.3% 151.1 146.8 3.0% CAR 177.3 178.9 (0.9%) 187.9 196.1 (4.2%) 202.5 207.2 (2.2%) FXJ 269.6 270.4 (0.3%) 272.7 272.1 0.2% 274.8 279.0 (1.5%) NEC 174.2 176.5 (1.3%) 180.8 175.8 2.9% 172.3 155.7 10.7% OML 91.6 89.2 2.6% 94.1 97.0 (3.0%) 95.4 102.7 (7.1%) REA 385.0 387.4 (0.6%) 461.4 455.5 1.3% 511.1 522.2 (2.1%) SEK 370.4 376.4 (1.6%) 409.7 422.8 (3.1%) 460.9 470.9 (2.1%) SWM 288.9 298.8 (3.3%) 280.7 284.8 (1.4%) 262.2 262.2 0.0% SXL 177.6 177.7 (0.1%) 180.1 180.6 (0.3%) 179.3 180.7 (0.7%)

Source: Bloomberg, Macquarie Research, March 2017

Fig 24 EPS forecasts: Consensus vs Macquarie

EPS FY1 FY1 FY1 FY2 FY2 FY2 FY3 FY3 FY3

Macq Consensus Var Macq Consensus Var Macq Consensus Var APN 22.7 22.1 2.9% 24.1 23.4 3.1% 25.1 24.4 2.9% CAR 47.8 48.6 (1.7%) 51.7 54.5 (5.1%) 56.9 59.5 (4.4%) FXJ 6.4 6.3 1.0% 6.2 6.1 1.7% 6.3 6.5 (2.6%) NEC 11.4 11.1 2.3% 11.8 11.2 5.6% 11.1 10.6 4.4% OML 27.8 28 (0.6%) 28.6 30.8 (7.1%) 30.0 32.5 (7.6%) REA 179.1 180.2 (0.6%) 224.7 221.2 1.6% 252.7 259.7 (2.7%) SEK 58.1 58.6 (0.9%) 62.6 65.9 (5.0%) 71.2 74.4 (4.4%) SWM 9.8 10.1 (2.6%) 9.9 9.7 2.6% 9.4 9.3 0.7% SXL 12.0 11.8 1.6% 12.1 12.1 0.2% 12.2 12.1 0.6%

Source: Bloomberg, Macquarie Research, March 2017

All three Online names are trading below their 3-year rolling PE Rel average, highlighting scope for a multiple re-rate.

The three pure-play online names – CAR, SEK and REA – have traditionally traded at a premium

to the ASX 200 Industrials Index given their consistently strong and broad-based earnings growth

profile. We note that on a PE Rel basis against the ASX 200 Industrials Index, all three are

currently trading slightly below their rolling 36-month average (CAR at 9.7%, SEK at 6.9% and

REA at 8.5%).


9 March 2017 10

Fig 25 PE of CAR and ASX 200 Industrials

Fig 26 PE Rel: CAR vs. ASX 200 Industrials

Source: Bloomberg Macquarie Research, March 2017 Source: Bloomberg Macquarie Research, March 2017

Fig 27 PE of SEK and ASX 200 Industrials

Fig 28 PE Rel: SEK vs. ASX 200 Industrials


Fig 29 PE of REA and ASX 200 Industrials

Fig 30 PE Rel: REA vs. ASX 200 Industrials


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9 March 2017 11

We note there is looks to be a linear correlation between PER and 3-yr EPS CAGR forecasts for

online market place verticals, as illustrated by Fig 31. This particular comparative suggests REA,

SEK and CAR are all trading close to fair value against international peers. EV/EBITDA analysis is

less conclusive.

Fig 31 PER vs. EPS CAGR (3yr)

Fig 32 EV/EBITDA vs. EBITDA CAGR (3yr)

Size of marker reflects market cap (USD). Source: Company source, Macquarie Research, March 2017


Fig 33 P/FCF vs. FCF CAGR (3yr)

Fig 34 FCF yield (FY1)



Fairfax Media

REA Group

Rightmove

Scout24

Trade Me Group

ZPG

Auto Trader

Carsales

Seek

Median

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

10x 15x 20x 25x 30x 35x

EPS CAGR (3yr)

PE (FY1)Fairfax Media

REA Group

Rightmove

Scout24

Trade Me Group

Zillow

ZPG

Auto Trader

Carsales

Seek

Median

0%

5%

10%

15%

20%

25%

30%

5x 10x 15x 20x 25x 30x 35x

EBITDA CAGR (3yr)

EV / EBITDA (FY1)

Fairfax Media

REA Group

Rightmove

Scout24

Trade Me Group

Zillow

ZPG

Auto Trader

Carsales

Seek

Median

-10%

0%

10%

20%

30%

40%

50%

10x 20x 30x 40x 50x 60x 70x

FCF CAGR (3yr)

P / FCF (FY1)

2.5%

3.0%

4.1%

5.1% 5.1%

1.7%

3.3%

4.7%

4.1%

2.3%

4.1%

0%

1%

2%

3%

4%

5%

6%

FCF yield (FY1)


9 March 2017 12

Key catalysts for Online marketplace verticals (SEK, CAR, REA)

Stock Catalysts

SEK Ongoing yield growth from premium products;

Continued robust market conditions in Australia, as per ANZ Job Ad Index and SEEK Employment

Index (monthly releases);

Continued strong growth and market share gains in China (ZPIN and 51Job report quarterly);

REA Stabilisation of new home listing volumes in the half, particularly against weak comps for the current

March quarter and then in May/June. External data sources may be volatile and unreliable for

assessing these trends at the moment, so validation will be required via channel checks;

REA gives quarterly updates in conjunction with the release of News Corp’s quarter results. We

expect a strong March quarter on the back of stabilised volumes, some assistance from seasonal

factors (timing of Easter), and lower cost growth due to operational decisions and timing factors

around marketing spend;

FY18 price changes will be announced around May, which we think will underpin the yield growth

story for another year;

CAR There are few external data points that conclusively speak to CAR’s outlook, given pricing changes

have recently been locked down, and visibility of inquiry volume is limited.

New car listing volumes traditionally pick up into June due to promotional activity, and we would

expect this to occur again this year.

Further developments in the Finance industry may negatively impact on Stratton going forward.


Stan – Strong subscriber momentum continues. Ascribing invested capital as base valuation assumption.

One business that has shown further positive momentum over the half (and January 2017) was

Stan, the subscription video on demand (SVoD) JV between Fairfax and Nine. We have previously

not ascribed value to this asset given the uncertain forward outlook and competitive environment,

as well as the requirement for further capital investment by the JV partners.

While financial transparency is not available, the business does look to be broadly on track for its

plan, albeit with content and marketing investment most likely trending higher against the

backdrop of continued strong subscriber growth. Management has previously flagged that Stan

would cash flow break-even by 2HFY18.

January saw record gross subscriber adds, although net subscriber growth hasn’t fully reflected

this, given a “weaker than expected” December on the subscriber front.

To date, Stan has seen off one key competitor in Presto (FOXTEL/Seven West Media JV), and is

currently facing a very soft launch by Amazon in Australia. FOXTEL Play is increasingly being

promoted as a low-cost OTT solution, while Netflix is the market leader and continues to invest

heavily in its content.

The primary challenge going forward for Stan remains containing churn in the context of a

dynamic competitive environment and also a 100% uncontracted customer base.

There may be scope for Stan to implement price rises in time, with a $1 per month increase

equating to a 10% revenue uplift that would effectively all drop through to earnings, albeit with a

small offset from any uptick in churn.

In the context of the risks and opportunities discussed, we have taken a conservative approach to

modelling Stan, which sees continued growth in subscribers as its content library improves under

the Showtime deal, albeit against a further escalation in content costs. We have allowed for ~10%

pa cost growth in outer years (with an additional step-up in 2020 to reflect a renewal of its

Showtime deal). Reaching break-even will be a critical milestone for Stan given the operating

leverage that exists if it can grow from that point.


9 March 2017 13

Fig 35 Stan: Subscriber profile (Company presentation, October 2016)

Fig 36 Stan: Illustrative EBITDA profile

Source: Company source, Macquarie Research, March 2017 Source: Macquarie Research estimates, March 2017

Fig 37 Stan: Gross subscriber adds

Source: Company source, March 2017

Key risks to the business model include new entrants to the space, the loss of key content

agreements (such as Showtime) or content inflation given the stronger-than-expected take-up

rates in Australia.

Overall, given Stan is building scale and improving competitive positioning, we have ascribed

invested capital as a base case and risk-adjusted valuation for the business.

A DCF approach to valuation does imply some upside to this, although it remains highly

dependent on assumptions around final subscriber numbers/EBITDA and assumed terminal

valuation multiples.

FY15 FY16 FY17e FY18e FY19e FY20e


9 March 2017 14

Traditional media trends and outlook

TV

The TV industry remains under pressure. In the second half, traditional FTA TV revenues declined

by 4.5% in metro areas, although this moderated to declines of 2.7% after allowing for regional

and AVOD advertising revenues.

We expect TV revenues to remain under pressure, albeit at a slow pace in 2H17, down 2%.

Fig 38 Metro free to air TV ad market growth (% ch vs pcp)

Source: FreeTV, Macquarie Research, March 2017

Fig 39 FTA TV revenue share

Source: FreeTV, Macquarie Research, March 2017

Radio

After a couple of buoyant years, radio revenue growth moderated to 1.5% in 1H17. We are

forecasting radio ad growth of 3.0% in the second half.

(1.0%)

6.0%

9.0%

0.2%

(5.3%)

(12.6%)

(5.0%)

18.9%

16.9%

1.1%

(5.1%)

(1.9%)

(3.8%)

(0.3%)

5.0%

1.7%

(3.0%)

0.2%

(0.4%)

(3.9%)(4.5%)

(2.0%)

0% 0%

(15%)

(10%)

(5%)

-

5%

10%

15%

20%

1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17eFY18eFY19e

% ch vs pcp

35.9%

39.2%38.4%

39.1%

41.4%

38.5% 38.0% 37.9% 37.5% 37.6% 38.1%

40.0% 40.3% 40.5%39.7%

41.3%40.4%

39.5%38.5%

39.2%

40.8%

38.4% 39.0% 38.5%

33.8%32.7%30.8%

31.8%30.9%

33.2%31.9%

33.2%

35.0%33.6%

34.9% 34.5%

38.1% 37.6%38.7% 38.6% 39.2% 38.6% 38.2%

35.6% 35.0%

37.0% 36.5% 36.5%

30.3%28.1%

30.8%

29.1%27.7% 28.3%

30.1%28.9%

27.5%28.9%

27.0%25.5%

21.6% 21.9%21.5%20.1% 20.4%

21.9%23.2%

25.2%24.2% 24.6%

24.5%25.0%

15%

20%

25%

30%

35%

40%

45%

1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17e FY18e FY19eSeven Nine Ten


9 March 2017 15

Fig 40 Metro radio ad market revenues (financial year to June)

Source: Commercial Radio Australia, Macquarie Research, March 2017

Out of home

The Out of Home industry has had a more tempered start to 2017 after a period of very strong

growth in 2016. We forecast segment growth to slow to 5% this year (from 13%).

While there is still a lot of capital going into digitising billboards, we expect a lot of the growth over

the next few years will bias toward the small format/poster side, where digital investment is only

ramping up now.

Fig 41 Outdoor industry revenue growth continues

Fig 42 Quarterly growth by segment

Source: OMA, Macquarie Research, March 2017 Source: OMA, Macquarie Research, March 2017

-0.3%-0.6%

-1.9%

2.9% 2.8%

1.2%

5.0% 5.1%4.6%

7.2%

1.5%

3.0%

-4%

-2%

0%

2%

4%

6%

8%

1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17e

13.4%

20.7%19.6%

11.7%

19.6%20.6%

14.1%

20.0%

9.3%10.5%

12.5%13.2%11.6%

2.1%

0%

5%

10%

15%

20%

25%

% ch vs pcp

27%

7%

2%

7%

17%

22%

15%

10%

26%

18%

31%

14%

9% 9%

18%19%

17%

8% 7%

14%16%

6%

8%

28%

13%

0%

10%

20%

30%

40%

Road - Billboards Road - Other Transport Retail Total

% ch YoY

4Q15 1Q16 2Q16 3Q16 4Q16

oOh!oOh! (Air)APN (Air/Rail)

APN (Buses)Adshel

JC Decaux

oOh!APNQMS


9 March 2017 16

Fig 43 Digital revenue tracking at over 40% in recent months

Fig 44 Digital revenue tracking at 39.8% of total OOH revenues (CYTD)

Source: OMA, Macquarie Research, March 2017 Source: OMA, Macquarie Research, March 2017

Licence fee cuts

Annual TV and radio licence fees may be cut again in this year’s budget, after being reduced by

25% in last year’s budget. TV fees fell from 4.50% to ~3.38% and radio fees fell from 3.25% to

~2.44% for metro areas (refer our note last year, Australian media sector – Partial licence fee

cuts for broadcasters, 5 May 2016).

It is possible that licence fees will be cut to a fixed level, such as 1% or 2%. Given the starting

points are different by operator (given regional/metro and TV/radio mix), so too will the

outcomes.

We summarise the earnings and valuation impact from a 25% reduction in table 47. For

valuation impact, we have used a blunt tool, by applying estimated sector multiples for TV and

Radio stocks as a proxy (5x EV/EBITDA for TV and 7x for radio).

Any licence fee cuts would produce the greatest relative earnings and valuation benefits for Nine

and Seven. Southern Cross would also benefit, depending on the type of cut (i.e. whether it

extended equally to Radio). APN would benefit moderately, while Fairfax Media would receive

only a small benefit (given that it owns only 54.5% of MRN, which in itself is a small part of

Fairfax’s earnings base).

For example, an additional 25% cut in TV and radio licence fees would generate EPS accretion

for Nine of 6.2% and for Seven of 4.8%, and valuation uplift of 3.8% and 4.1%, respectively.

Earnings and valuation accretion for Southern Cross would be +2.5% and +2.0%, respectively.

APN earnings would rise by 1.3% and valuation by 0.9%.

Fig 45 Impact of 1ppt reduction in broadcast licence fees

EBITDA impact EPS impact Valuation impact (cps) Valuation impact (%)

TV only Radio only

TV + Radio

TV only Radio only

TV + Radio

TV only Radio only

TV + Radio

TV only Radio only

TV + Radio

NEC 4.8% n/a 4.8% 6.2% n/a 6.2% 4.78 n/a 4.78 3.8% n/a 3.8% SWM 3.4% n/a 3.4% 4.8% n/a 4.8% 3.26 n/a 3.26 4.1% n/a 4.1% TEN $5.4m n/a $5.4m 1.0cps n/a 1.0cps 7.25 n/a 7.25 7.2% n/a 7.2% SXL 0.8% 1.1% 1.8% 1.1% 1.5% 2.5% 0.88 1.71 2.59 0.7% 1.3% 2.0% FXJ n/a 0.3% 0.3% n/a 0.2% 0.2% n/a 0.22 0.22 Restricted Restricted Restricted APN n/a 1.0% 1.0% n/a 1.3% 1.3% n/a 2.91 2.91 n/a 0.9% 0.9%

Fairfax Media on research restrictions. Source: Macquarie Research, March 2017

30%

34%

41%39% 38%

40%42%

43%40%

48%

41%

33%

43%45%

0%

10%

20%

30%

40%

50%

Digital as a % of Total

7.3%

11.3%

17.0%

28.0%

39.1%

43.8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

CY12 CY13 CY14 CY15 CY16 CYTD17

Digital as a % of Total


9 March 2017 17

Upgrade NEC to Outperform, with $1.25/sh TP

Ratings on the improve

Nine has had a strong start to the ratings year, with its ratings share up 8.0% for the first three

weeks of the ratings season, and increases of +15.0% and +13.9% for 16-39yo and 25-54yo

demographics respectively. Nine is cycling a disappointing start to 2016, so it will take some time

for this to cycle through to revenues – but if sustained presents an opportunity for Nine to improve

revenue share as an offset to structural industry headwinds.

Fig 47 plots the ratings changes in recent years at Seven and Nine against the corresponding

share price performance in February and March. We note that the top left and bottom right

quadrants of the chart are empty other than a single data point, suggesting that directionally there

is a strong relationship between Feb/Mar share price performance and early season ratings

performance.

Fig 46 Cumulative YTD ratings vs pcp (Weeks 7-9)

Fig 47 Directionally, early season ratings do show a relationship with Feb/March stock performance

Source: OzTam, Macquarie Research, March 2017 Source: OzTam, Macquarie Research, March 2017

Upgrade to Outperform

We upgrade NEC to Outperform with a target price of $1.25/sh up 15cps, which incorporates a

~10cps increase due to the inclusion of Stan in our valuation.

At $1.25/sh, NEC would be trading on a TV EV/EBITDA multiple of 6.0-6.3x

Potential catalysts:

Continued improvement in ratings which, if sustained, will translate to revenue share gains.

Every 1ppt of revenue share gained is equal to around $26m in net revenue to Nine, which

would add 14% to EBITDA and 18% to EPS;

Ongoing good cost control, including a previously announced program to remove $50m in

costs by FY19;

Potential upside to earnings and valuation if licence fees are cut (refer earlier discussion);

Valuation upside if Stan’s operating momentum improves and investors gain confidence in

its outlook;

The key risk remains the broader TV ad market trends, which accelerated last half.

Cash conversion weak in the half, and will remain volatile

EBITDA cash conversion was weak again for Nine in the half at 10%. If we adjust for Warner Bros

payments and the NRL pre-payment, this improves to 76%.

-6.4%

8.0%

-0.2%

-13.6%

15.0%

2.7%

-10.2%

13.9%

-2.0%

-15%

-10%

-5%

0%

5%

10%

15%

20%

7 9 10

% ch vs pcp

Total Ppl 16-39s 25-54s -20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

-10% -5% 0% 5% 10%

% ch in cum ratings (Wks

1-3)

% ch in share price (Feb-Mar)


9 March 2017 18

For FY17, we see further impacts from onerous contract provisions, given the $40.7m closing

provision that we expect will unwind during the year. There should also be a small negative

working capital increase due to the pre-payment for the new NRL deal more than offsetting the

$40m benefit (Macquarie assumption) as part of the pre-payment on the old NRL deal rolls off.

Fig 48 NEC cash conversion (EBITDA/Un-geared pre-tax cashflow)

FY14 FY15 FY16 1H17 2H17e FY17e 1H18e 2H18e FY18e 1H19e 2H19e FY19e

EBITDA (inc associates) 311.0 286.5 201.7 119.7 55.6 176.4 123.2 60.0 183.1 113.7 61.0 174.7 Operating cash flow 189.0 246.2 50.3 - 32.8 8.6 - 24.3 79.6 6.3 85.9 60.9 23.0 83.9 Add back Interest paid 65.1 18.8 13.7 4.6 6.0 10.6 4.9 4.0 9.0 4.6 5.1 9.7 Add back Tax paid 22.7 9.5 38.1 39.9 15.2 55.1 38.1 11.2 49.3 26.4 11.1 37.5 Un-geared pre-tax cashflow 276.8 274.5 102.1 11.7 29.7 41.4 122.7 21.5 144.2 91.9 39.2 131.1 EBITDA cash conversion 89.0% 95.8% 50.6% 9.8% 53.4% 23.5% 99.6% 35.8% 78.7% 80.8% 64.3% 75.0%


In Figure 49 below, we have tried to de-construct key drivers to Nine’s cash flow over the next two

and a half years, as it will be quite volatile due to a number of lumpy cashflow items impacting the

company. These include timing of NRL pre-payment costs (in and out), exit costs related to Nine’s

old Warner Bros output deal, timing issues for licence fee payments, a build-up of working capital

given the increased focus on local content productions, and other general working capital

movements.

While cash conversion will generally remain under 100% during this period (FY17-19), this is due

to the factors discussed and we would expect it to normalise after that.

Fig 49 Detailed breakdown of working capital movements (1H17-2H19e)

$m 1H17 2H17 FY17 1H18 2H18 FY18 1H19 2H19 FY19

EBITDA 119 55 174 122 59 181 112 60 172 Warner Bros -29 -20 -49 -22 -22 -43 -22 -22 -43 Prepayment (NRL rights 2012-17, inflow) 40 40 40 40 0 Prepayment (NRL rights 2018-22, outflow) -50 -50 0 0 Onerous contract -3 -2 -5 -2 -2 0 Programming build-up -20 -17 -37 -17 -17 -33 0 Licence fee +17 -17 0 0 0 Other working capital movements -23 -10 -43 0 0 0 0 0 Total working capital movements -108 -26 -133 0 -38 -38 -22 -22 -43 Un-geared, pre-tax cash flow 12 29 41 122 21 142 91 38 129 Cash conversion 10% 53% 23% 100% 35% 79% 81% 64% 75% Underlying cash conversion 76% 17% 57% 85% 72% 80% 100% 100% 100%

Source: Company sources, Macquarie Research estimates, March 2017

In addition to these working capital items, Nine will receive $111m, net, from the sale of its

Willoughby site (1H18). As a result, despite poor underlying cash conversion, we still expect

Nine to repatriate a high percentage of earnings to shareholders via dividends over the next few

years.


9 March 2017 19

APN

The good… The not so good… The interesting…

Adshel revenue growth exceeded

market growth in CY16 in both

Australia (+19.3% vs. market at

+15.8%) and NZ (+32.6% vs. market

at +29.2%). Key drivers were share

gains (including a 3.3ppts share gain

in Australian Roadside Other),

digitisation and wider market growth.

NZ represents less than 20% of

Adshel revenue.

A key growth driver for Adshel is the

digitisation of its network

(particularly road) across Australia

and New Zealand. Digital was over

30% of CY16 revenues (up from 21%

in CY15), compared to oOh!media at

46% and APN Outdoor at 34%.

Management noted that it is

achieving a payback period of less

than two years on its digital

investment, and that premium rates

are holding.

While ARN had a weak ratings

period mid-2016, results improved

from survey 5 and ended with

another uptick in survey 8.

Management noted a strong

recovery audience at the back-end of

CY16. Management appear

confident in the year ahead for radio.

Management flagged that group

revenue in January was

comparable to strong results in the

pcp. ARN outgrew the market

(+0.8%) in January, though February

was softer. March is looking better

with strengthening briefing activity

and a growing pipeline.

The balance sheet is in much better

shape, with net debt/EBITDA of 1.2x

an improvement on 1.8x six months

ago. EBITDA interest coverage is

9.7x, and APN is operating well

within its covenants.

Radio cash conversion exceeded

90%, and is providing funds to

reinvest in outdoor, debt reduction

and shareholder returns.

The inclusion of Conversant Media

has increased APN’s digital presence

and has created cross-promotion

opportunities, with management

noting that ARN-Conversant are

winning pitches in the market.

Radio revenues fell 5.2% in 2H16

(+1.9% for the year, which was

below the market), driven by weak

mid-year ratings and

underperformances in the Melbourne

and Perth markets. On the plus side,

management was able to quickly

control costs, which fell 8.1% in

2H16 (and fell ~$10m HoH). EBITDA

margins came in at 38.2% for the

year and 41.6% for the second half.

To address the 2H16 issues,

management have hired a new

commercial director in Melbourne

and a new national commercial

director, as well as relaunched a new

show format in Perth in January.

Group costs rose in January driven

by radio content, site rental increases

and the advancement of multiple

integration projects. APN will look to

partly offset the increase in radio

talent costs with the renewed ATN

contract. Adshel costs rose by 16%

to $159.6m, although the majority of

costs were related to revenue-

generation, selling and capabilities.

HK Outdoor revenues fell by 29%

for the year (in AUD terms) driven by

weak ad market conditions and

unprofitable contracts. The onerous

Buzplay contract ends in June and

will negatively impact 1H17 earnings.

The company is targeting a return to

profitability in CY17, having

restructured the business, renewed

key contracts (Western harbour

tunnel (seven years) and Eastern

harbour tunnel (two years)) and won

the new five-year HK Tram Shelters

contract.

Adshel capex spend will be at least

$50m in CY17, subject to the

outcome of several large tenders.

Half of the capex spend will be

toward the digitisation of Adshel’s

network.

Corporate costs rose by 9.4% to

$13.9m for the year, driven by

ongoing compliance matters.

Management noted that “strong”

forward bookings and an

improving pipeline for Adshel

suggest that advertiser activity is

returning to normal levels, after a

softer January for Roadside Other

(Adshel performed in line with the

market).

Adshel will continue to invest in data,

digitisation and technology,

including an automated sales

platform as well as audience and

geo-targeting capabilities. Adshel

plans to roll out 70 digital road

screens in NZ in 1H17 (currently 150

total) and 137 in Australia in 2H17

(currently 366 in total). Adshel also

currently operates 186 Sydney

Trains digital assets. Adshel remains

on the lookout for bolt on

acquisitions.

APN have recommended the

reinstatement of the dividend at

4cps (fully-franked) (Macq 4cps).

Management noted that this amount

is at the bottom end of APN’s policy.

A key focus near-term will be

integrating APN’s radio, outdoor

and digital assets. Co-location

across all markets will be a key

driver. Revenue generation, rather

than cost out, will be the objective.

Central to this will be improving

APN’s content sharing and cross-

platform capabilities, with a focus on

video content.

Management indicated that it is in a

position to separate the Soprano

asset (possibly via IPO) when the

appropriate market conditions arise.

A potential IPO during last year was

shelved due to a weak market.

APN will re-brand and launch new

go-to-market strategies in 1H17.

APN’s debt facility matures in July

2019 and it will consider its options

over the next 12-18 months. Its

current all-in cost of debt is ~5.5%.


9 March 2017 20

CAR


Revenue trends were strong across

the Group, other than for Stratton, with

Domestic Core revenues up 8.2%.

Excluding Stratton, Domestic

Investments revenues grew by 58%,

in part boosted by the acquisition and

expansion of Auto Inspect.

Management commentary does

suggest Tyresales is the primary

underlying driver here. While Carsales

is building positive momentum here,

margins do remain very thin.

Dealer revenues grew by 9.9%, which

was ahead of our pre-result

expectations. Growth was spread fairly

evenly between price rises, increased

take-up of depth products, and volume

increases.

Display had another strong half, up

9.2% compared to pcp. Management

noted it is increasing native advertising

to driver growth here and counter price

deflation for banner ads and other

programmatically traded inventories.

Management is also working more

closely with OEMs, instead of being

overly reliant on agency relationships

to build this business.

Price increases in Private are

carrying through, with what appears

to be limited churn. As a result, this

change looks to be more than

offsetting the negative impact from

increasing the free add hurdle from $3k

to $5k in January in 2H.

Data & Research services continues

to demonstrate strong growth as a

category, up 10.3% - driven by both

yield and volume growth.

Outlook commentary was robust,

with management pointing to “solid

growth” across revenues and earnings

for the Domestic Core business.

Commentary on the management call

suggest there may be some scope for

margin expansion within this as cost

growth tapers in the second half.

As expected, Stratton was a drag on

this result, with revenues down 21.8%

and EBITDA down 49.4% (Finance and

Related Services segment). The issue

remains tied to changes with a major

lender, with lower volumes attracting

lower direct commissions as well as

the loss of high-margin volume

bonuses. 2H17 sounds like it will be a

period of re-investment and re-

positioning, with a view to returning this

division to growth in FY18 and beyond.

Cost growth for the Domestic Core

business was higher than expected

in the first half, up 9.0% on pcp.

Management attributed this to

increased labour charges and

marketing, with the latter partly a

timing-related impact. The absorption

of Group/International costs in some

roles also contributed. As mentioned,

commentary on the call suggested this

growth rate will taper in the second

half.

Brazil reported underlying revenues up

only 3% and underlying EBITDA

down 24% in local currency terms.

Management attributed much of this to

economic conditions in Brazil, although

the recent replacement of the CEO

suggests there are also some issues

with execution. The financial result is a

big turn-around from 6 months ago

when management flagged Brazil as a

potential “good growth contributor” in

FY17 following the trial of the lead-

based model.

New Car Listing volumes were

weaker in the second half, in part

driven by OEM policies on this matter.

There was a modest recovery toward

the end of last year (on a comparison

basis) and the early listing volumes in

2017 are broadly consistent with the

same time last year.

Capex rose 20% to $6.5m. Cash

capex rose 18% to $2.1m due to

regional office fit-outs, while a 21%

growth in capitalised labour costs

reflects technological investment in

international and adjacent businesses.

CAR’s interim dividend of 18.7cps is

up 5.1% on pcp, and equates to

82.7% of adjusted earnings per share.

The Carsales balance sheet remains

strong, with credit metrics improving

slightly over the 6 months to

December. Net debt/EBITDA

(annualised) fell by 0.03x to 1.03x,

while interest coverage increased by

0.02x to 20.6x.

Cash conversion was solid at 92.1%.

It had strong conversion in 2H16

suggesting timing differences as a

possible driver here.

Management spoke to the seasonality

in the business slightly favouring the

second half due to activity levels in

January and June being strong in 2H,

while December is a quiet period in 1H.

This was the last result that will be

delivered by co-founder and CEO

Greg Roebuck, following the

announcement of his retirement in

January. Cameron McIntyre (current

COO), replaces him in the role,

effective 17 March. We do not expect

any shift in strategy given how closely

the two have worked together over

many years.

Redbook Inspect continues to grow

and management is positive on the

differentiation this service can provide

going forward. RI now has 13 sites now

and over 40 others doing inspections

in-field. Margins will be inferior to the

core business, but we expect the

earnings contribution is positive and

will improve further as the business

scales.

Amortisation of acquired intangibles in

the half was $1.2m, consistent with

pcp.

The company continues to evolve

its Depth product strategies, seeking

to assess the scope for additional

revenues here in the context of its

primary lead-based model.

WebMotors (Brazil), distributed

BRL150m to shareholders via a

special dividend/capital reduction

(Carsales’ share ~A$18m).


9 March 2017 21

Korea achieved revenue growth of

26% and underlying EBITDA growth of

18% in local currency terms. This was

driven by dealer, private and display

revenues – with the latter up over 50%

vs pcp. Management had previously

flagged double-digit price rises would

aid this business in FY17.


9 March 2017 22

FXJ


Digital revenue trends at Domain

remain robust, up 15%, driven by

12% growth in depth revenues.

Domain also saw strong digital

media, developer & commercial

revenue growth. This growth partly

offset a weak market and print

revenue declines. Looking ahead,

Domain will focus on expanding into

new geographic markets, continued

depth product penetration and yield

growth.

Domain outlook commentary was

positive, with management noting

that new listings have seen some

“early signs of improvement” in

February following a weak 1H17.

ACM cost out was better than we

had anticipated, resulting in an

EBITDA figure of $43.1m (down

4.7%) that was well ahead of our

expectations. Top-line trends

remained weak (as expected), driven

by softness in both ad revenues

(down 11.3%) and circulation

revenues (down 9.9%). Offsetting

this was an 11.7% reduction in costs

across the half from the ongoing

transformation program and other

cost saving initiatives.

Macquarie Media grew EBITDA by

11.2% to $13.3m, consistent with our

expectations. Revenue growth of

1.0% for the half was slightly below

market growth of 1.2%. Cost and

operational synergies following the

merger have been implemented, with

costs up 1% for the half. EBITDA

margins expanded from 17% to 19%.

Programming and sales

improvements are expected to drive

earnings in 2H17.

Stan had over 700k active

subscribers at 13 February, with

January delivering Stan’s largest

month in sign-ups (which was

attributed to an improved program

line-up). Management reiterated that

Stan is on a clear path to profitability

and expects to be cashflow break

even during FY18. Key drivers

include exclusive rights to

SHOWTIME in Australia and Stan’s

off-line viewing feature (to be

launched in March).

Overall top-line growth for Domain

slowed in the half (+5.8%), driven by

weak listing trends in the December

half plus an 11% decline in printing

revenues within the business.

Domain costs were up 19%

(including +44% growth in digital

costs, +27% ex-acquisitions and

one-offs), resulting in negative

EBITDA growth for the period. The

growth in digital costs was split

across investment in staff,

technology and product. Print cost

declines of 11% reflected cost out in

that area of the business. Domain

expenses in the second half will

moderate to ~13%, taking pressure

off the earnings line.

The trading update indicates top-

line trends have remained soft at the

beginning of this half, although the

decline in revenue trends has

moderated from January into

February. Specifically, group

revenues fell ~10% in January in a

“slower than usual start across the

media industry”, while revenues were

down ~6% in the first two weeks of

February. As per previous updates,

cost savings will continue to be

implemented across the Group.

Metro Media was a bit weaker than

we had anticipated (EBITDA down

12.2% to $27.7m), driven by a 16.6%

decline in ad revenues (with total

revenues down 8.2%). This was

partly offset by cost out of 7.6%

across the half (including a 9% fall in

publishing costs, with a similar run-

rate expected in 2H). Digital revenue

growth of 22% largely offset print

circulation revenue declines.

NZ Publishing EBITDA fell by 6.2%

to A$25.9m. Ad revenues fell 10%

and circulation revenues fell 8% (lcy),

offset by an 8% reduction in costs.

Digital revenues grew by 21%, and

the business will continue to invest in

digital and events.

Fairfax announced a strategic

review of Domain in preparation for

the potential separation of Domain

into a listed entity.

Under any potential deal, Fairfax

would retain a controlling 60-70%

stake in Domain, and the remainder

would be held by existing Fairfax

shareholders (with management

stating that the current intention is

that no new capital would be raised).

Any potential separation would be

implemented this CY. Antony

Catalano would stay on as Domain

CEO. Any transaction is subject to

multiple conditions including a

“satisfactory outcome” with the ATO

and shareholder vote.

If the transaction completes, Domain

would incur post-separation costs

of $8-10m (comprising $4m board,

listing and other costs, plus $4-6m

transfer of corporate costs and also

commercial agreements between

Domain and Fairfax).

Fairfax declared an interim dividend

of 4cps, in line with our expectations.

The dividend was 70% franked.

Net debt at 31 December 2016 was

$112m, implying net debt/EBITDA of

0.4x (vs 0.3x six months earlier).

EBITDA interest coverage grew to

31x (vs. 25x six months ago).

Fairfax is developing a next

generation publishing model which

will increase the focus on digital

publishing, but also see daily print

publications continue for “some years

yet”. Management believe this is the

best outcome based on current

advertising and subscription trends.

Fairfax expects the NZ Commerce

Commission to hand down its

determination on the proposed

merger of Fairfax NZ and NZME by

mid-March.

D&A fell 47.4% to $18.3m in the half

due to the previous write-down of

assets. Management expects full-

year D&A to be at the lower end of

the $40-50m range previously stated.


9 March 2017 23

OML

The good The not so good The interesting Revenue and gross profit grew

strongly for the year, up 20.1% and

30.3%, respectively, ahead of our

estimates of 14.7% and 28.4%.

Gross margins of 43.1% for the

year and 44.8% for the second half

were both well up on pcp due to

operational leverage.

EBITDA of $73.5m was at the top

end of the recently upgraded

guidance range of $72-74m (Macq

$73.7m), representing growth of

27.4%. Key drivers included strong

top-line organic growth and

contribution from recent acquisitions.

Acquisitions made in CY16 (ECN,

Cactus, Junkee) have been

successfully integrated with full run-

rate and synergies expected to be

achieved during CY17. Realisation of

ECN synergies is ahead of

management’s schedule. InLink has

seen revenue growth of over 50%

from CY15.

oOh!’s larger divisions grew strongly,

with Road up 12.3% and Retail up

10.2%. Road will benefit further in

CY17 from a capex program around

digital conversions that was back-

ended to 2H16.

NZ revenues rose by 75.2%, driven

by a revamp of oOh!’s Retail

strategy. The NZ market has similarly

attractive market dynamics to its AU

counterpart.

The market outlook is positive, with

oOh! expecting the outdoor market to

grow in CY17 despite increased

competition from both traditional and

new media. Note that no CY17

guidance commentary was provided

due to the current status of the

proposed scheme of arrangement

with APN Outdoor.

Cashflow was solid, with 94% cash

conversion to EBITDA for the year

(un-geared, pre-tax op CF/EBITDA).

Management did note that the

receivables build-up at 31 December

is part seasonal and will reverse in

the current quarter, resulting in a

better cashflow outcome in 1H17.

Revenue growth in Fly was 2.8%,

impacted by the loss of the T2

Sydney contract. Management is

confident that contract wins in

Melbourne (T4) and Brisbane (Virgin

Domestic), plus the Cairns Airport

extension, will provide an offset and

that this division will see continued

growth.

Opex rose 33.5% to $71.4m for the

year, although half the uplift was

attributed to growth initiatives for the

year including acquisitions. The

remaining drivers were increased

investment in capabilities and

people. Opex expenditure growth

moderated in 2H16 relative to 2H15,

settling at ~5%.

oOh! incurred one-off non-

operating items of $3.3m ($2.7m

post-tax) related to acquisition costs,

due diligence costs related to the

proposed merger with APN Outdoor

and insurance proceeds relating to

claims from prior periods.

Capex increased by 39.0% to $39m,

driven by oOh!’s continued

digitisation program and further

investments in systems and

infrastructure. These initiatives are

expected to drive future growth.

Capex will remain elevated in CY17.

D&A rose 24.3% to $27.7m. D&A will

increase over the next couple of

years as oOh! continues to invest in

its screen assets, systems and

capabilities.

Adjusted NPAT of $34.4m was up

21.4% YoY, but was below our pre-

result estimate of $37.9m due to

higher depreciation expense.

Revenue growth in Place of

196.4% to $28.9m was boosted by

a full-year of InLink (acquired

December 2015) and a partial

contribution from ECN (acquired

November 2016).

oOh! continued its digital rollout in

CY16, adding 29 large format digital

road signs including regional

expansion (total: 54), 39 EVOKE

large format digital retail signs (total:

72), 25 Fly large format digital Fly

screens (total: 51) and over 200

small format retail screens. oOh!

operates over 8,000 digital screens,

up from 5,000+ in CY15.

Management continues to see

upside from the digitisation of assets.

Digital revenues were 45.6% of total

revenues, up from 31.9% in CY15

and 23.0% in CY14. oOh! had

previously been targeting a target of

45-50%, and it is likely that this

number will continue to trend

upwards.

oOh! has an attractive revenue

maturity profile, with over 70% of

revenue contracts maturing post

CY19 (and 35.2% of revenues

maturing post CY21).

The final dividend of 10cps

translated to a fully-franked full year

dividend of 14.0cps, up 47.4% on

pcp.

oOh!’s net debt/EBITDA ratio of

1.6x at 31 December is consistent

with the last couple of years, and is

well within oOh!’s banking

covenants. Management noted that it

is comfortable to operate within this

range while the company remains in

a growth phase.


9 March 2017 24

There was no material update on the

proposed merger with APN Outdoor.

The company expects the Scheme

Meeting to be held in April 2017 and

Merger implementation in May 2017,

and reiterated the board’s unanimous

support for the deal. Annualised pre-

tax cost synergies of at least $20m

are expected within two years of

implementation (ex-one off

transaction and integration costs).


9 March 2017 25

NEC

The good The not so good The interesting

Nine confirmed it is on track to deliver

EBITDA in line with pre-result

consensus estimates, and implied its

expectations sit somewhere near the

current median forecast of $175m

(Macq $176m).

The TV ad market is showing signs of

recovering. Management noted it is

currently experiencing high demand

for advertising across February and

March and has also seen some

lengthening of the market to support

programming in the April to June

period.

Nine has seen a pick-up in ratings

post the Olympics, particularly in key

demographics. It expects this to

translate into improved revenue

momentum from the June quarter, but

noted it is still cycling stronger comps

in the March quarter given it over-

monetised weaker ratings in the same

period last year. Key programming

that is currently performing above

expectations includes Married at First

Sight. Nine expects its revenue share

to improve in the second half relative

to both 2H16 and 1H17.

Nine continues to work at reducing

costs to counter difficult revenue

trends. Group costs fell 4.4% during

the half, reflecting broad cost

initiatives, reduced licence fees and

lighter programming costs against the

Olympics. Guidance was re-iterated

for TV costs to decline by around 1.5%

for the year, implying modest cost

growth in the second half.

In addition to looking internally for cost

out opportunities, Nine will continue to

try and maximise efficiencies across

the industry.

Digital EBITDA rose by 13%.

Stan is currently tracking ahead of its

business plan. Summer exceeded

expectations and January produced a

record for gross adds. Management is

increasingly confident that it has built a

“viable, competitive business”, and

noted tougher trends at Foxtel and the

soft launch of Amazon.

Nine’s TV revenue share

continued to decline, largely due

to the Olympics being on Seven

during the half. December half

share fell to 35.0%, down from

38.2% in the pcp. On a more

positive note, this does represent

a stabilisation in the business

and there is scope to reclaim lost

market share going forward.

Compounding this, the broader

FTA metro TV advertising market

declined by 4.5% during the half,

although the rate of decline was

only 2.7% if Regional and catch-

up/AVOD advertising revenues

are included..

EBITDA cash conversion was

weak again for Nine in the half at

10%. If we adjust for Warner

Bros payments and the NRL pre-

payment, this improves to 76%.

Weak cash flow has been a

thematic at Nine in recent years.

Free cash generation will remain

subdued because of payments to

Warners across FY18/19, and

improve after then.

Nine’s full year dividends are expected

to be at the lower end of previous

guidance range of 80-100% pre

significant items. As flagged at the

FY16 result, the Board intends to

spread dividend payments more evenly

over the year.

Nine took a $260m impairment charge

against Goodwill. The impairment

review was triggered by the market cap

of Nine being well below book value.

As part of the impairment testing, key

assumptions were made. These include

an expectation of low single-digit

declines in ad spend in the near-term

and a flat market medium term; Nine to

return to recent historical levels of

market share; and expenditure to

remain “broadly flat in nominal terms

over the life of the model”.

Management is not expecting a

substantial uplift in programming costs

when its new NRL deal kicks in (2018

season), although it will cycle out of the

$20m in simulcast revenues it is now

getting from FOXTEL. Against these

changes, it will get additional prime-

time games to write revenues against,

and so will get a programming cost

offset.

Nine won its dispute with the ATO,

allowing it to reverse a $10m provision.

Nine continues to invest for growth,

including a further $20m in funding for

Stan and $17m for CarAdvice in the

half.

Capex spend is expected to be at a

similar level to 1H in the second half of

the year ($18m). 1H capex included the

studio/office relocation in Perth as well

as ongoing Digital investment.

Management believes that the ThinkTV

promotion is coming along well and

translating to money coming back to TV

from other formats.

From March 1, Nine will sell TV ad

programmatically, improving inventory

utilization.

When asked, Nine’s CEO Hugh Marks

commented that he doesn’t see Print as

being a strategic asset for the Nine

business.


9 March 2017 26

SEK


Management reaffirmed FY17

guidance for reported NPAT of

~$220m (at the top end of previous

guidance of ~$215-220m) (ex NRIs

and early stage losses of $25m) (Macq

$220.9m on this basis). Reported

NPAT for the half rose by 10.9% to

$113.6m.

Domestic employment delivered

another good half, evidenced by

revenue growth of 13% and EBITDA

growth of 10%. The quality of growth in

this business is increasing, as top line

momentum is sustaining despite

tapering in volume growth (+3% 1H17

vs +5% in FY16). The pick-up in yield

is increasingly coming from new

products, with ~5% of revenue growth

from prominence products and

Premium Talent Search. The remaining

growth was split across mix shift and

price rises.

Zhaopin had a strong half, growing

revenues by 23% and EBITDA by 20%

in local currency. Zhaopin continues to

take share, and grew unique hirers by

20% and average daily unique visitors

by 16% in 2Q17. It will continue to

reinvest in sales and marketing (SME

focused) and new product solutions to

drive hirer and candidate growth.

SEEK declared an interim dividend of

23.0cps (fully franked), up 10% on the

pcp. SEEK has grown its dividend by a

~23% CAGR between 1H09 and 1H17.

Cash conversion (Ungeared, pre-tax

cash flow / EBITDA) was over 100%.

However, operating cashflow was

weaker in the half due to the payment

of tax related to the profit on sale of

IDP (~$84m).

SEEK retains a strong balance sheet

with net debt/EBITDA of 0.7x at 31

December (on $234m net debt) and

EBITDA interest coverage of 27.1x.

SEEK continues to operate well within

banking covenants. Management

noted that it is well-positioned and

actively on the lookout for acquisitions

and other opportunities.

OES had a strong half, with revenue

growth of 17% and EBITDA growth of

21% driven by 16% growth in student

numbers.

Domestic employment opex growth

remained very high at 17.2%, although

with the focus increasingly on

execution and sales initiatives, this

has the potential to directly drive near

term revenue growth opportunities.

SEEK Asia was flat in local currency

terms due to macro headwinds

(particularly across its established

markets of Malaysia, HK and

Singapore), as well as reinvestment in

the product and technology of the

consolidated platform. Management

believe SEEK Asia is very well

positioned should macro conditions

across its key markets improve.

Management noted that candidate

numbers in its weaker, more

established markets remain strong,

and that its share of placements is at

least 5x that of its competitor across

its markets (and up to over 40x in

some markets).

Brazil continues to face difficult macro

headwinds (10 consecutive quarters of

GDP declines), with revenue down

15% and EBITDA down 16% (local

currency). Management remains

committed to positioning the business

for the medium term and an eventual

recovery in the cycle, and flagged

further investment in sales/marketing,

product/technology, data and artificial

intelligence.

Mexico EBITDA fell by 27% (local

currency), despite 14% revenue

growth, due to heavy reinvestment in

in product/technology and regional

expansion. The focus remains on

continued penetration of the large and

growing SME market.

Learning revenue and EBITDA were

down sharply following the decision to

cease VET operations. Learning will

again deliver negative EBITDA in

2H17. The business has realigned its

cost base to position the new

education business for launch next

year. Management noted that the

business has “worked its way through

the most challenging operational

issues and associated financial

impacts.”

There was no material update on the

proposed privatisation of Zhaopin for

US$18/ADS by a consortium comprising

SEEK, Hillhouse Capital and

FountainVest Partners. If the proposed

transaction is completed, it is expected

that SEEK will retain a similar

controlling interest.

Early stage losses were $10.9m for

the half (vs. $9.0m in 1H16). Key

components include Jora, Learning and

overseas education. SEEK has guided

to early stage losses of ~$25m for the

year. SEEK continues to invest and

expand its early stage portfolio across

employment, international and

education, with management confident

that these businesses will contribute to

growth in the long-term.

Group capex rose by 17% to $35.2m,

with international representing the

majority of the growth (15%). Capex will

increase in FY17 due to reinvestment in

product and tech across all businesses.

Management commented that there

remains scope for price increases for its

Premium Talent Search product.

SEEK has penetrated the top tier of

higher value recruiters with this product,

and is now also shifting its focus to

smaller, lower value customers.

SEEK highlighted its effort for global

collaboration across its businesses, as

it increasingly looks to leverage A/NZ’s

capabilities across strategy, product,

tech and data analytics.

Management flagged that share-based

compensation expense will normalise

in 2H at ~$8-9m, after falling to ~$4m in

the first half due to the non-vesting of

incentive plans in international

businesses (mainly Brazil).

Net interest expense was low for the

half (down 62.3% to $5.2m) due to the

presence of the IDP proceeds as well

as strong cash flow, and will normalise

next half.

Net profit will be skewed to the first

half, due to the abnormally low share-

based compensation expense, timing of

tax payments and abnormally low net

interest expense.


9 March 2017 27

Capitalised costs rose due to

increased investment across the

platform.


9 March 2017 28

SWM

The Good... The bad... The interesting

Seven maintained leadership in TV for

the 21st consecutive half. 2H16 metro

revenue share was strong at 40.8%,

boosted by the Rio Olympics falling in the

period. (In the absence of The Olympics it is

likely Seven’s revenue share would have

declined relative to the 38.5% achieved in

1H16).

Seven was more upbeat on the TV ad

market outlook than in other recent

briefings, noting that it is now seeing

“growth in February and March for the first

time since 2014” and “the market beginning

to trade longer”. On the earnings call, Seven

attributed this to better promotion of the

industry under ThinkTV, with positive

responses from the FMCG segments as

well as Banking, Insurance and Telco.

Program sales and 3rd party production

revenues grew by 17% in 1H17 to $50.2m,

continuing a trends after very strong growth

in FY16. Strong second half growth is

expected, with revenue growth to exceed

25%. Last year, this category represented

close to 20% of TV EBIT.

For the full year, Seven improved its

Group cost growth guidance (excluding

Olympics/3rd party commissions) to

incorporate declines vs FY16 compared to

previous guidance that these would be flat

year on year. This is on an underlying basis,

and excludes costs inherited via the

acquisition of The Sunday Times and

PerthNow.

Seven continues to work with other TV

networks to rationalise costs given the

weaker TV ad market outlook. This is

currently manifesting in initiatives such as

the sharing of News helicopters and

ongoing focus to target efficiencies around

areas such as captioning services and

transmission.

While the December half result was

disappointing, the Magazines segment will

benefit from a ~$18m reduction in costs

in the 2H on the back of restructuring efforts

undertaken to date. As a result,

management expects the Magazines EBIT

contribution to improve “materially” in 2H17.

The acquisition of The Sunday Times

and Perth Now looks a positive one for

Seven, with an underlying EBIT contribution

north of $6m standalone pro-forma in the

half and further synergies to come.

The TV ad market deteriorated further in

the face of increased competition from

global digital players. Metro FTA TV

advertising fell by 4.5% in the half, although

the decline was more moderate at 2.7%

after allowing for revenues associated with

AVOD, regional and other digital platforms.

While guidance was re-iterated at ~20%

declines in EBIT for the year, we note that

this represents a deterioration in the

underlying profit outlook in the context of

exiting the loss-making Presto JV and also

given the earnings accretion that will come

from eight months of owning The Sunday

Times and PerthNow.

Group cost growth was high at 10.1%, but

excluding the Olympics and 3rd party

commissions Group opex fell by 3.8% in

the half.

Pacific Magazines earnings fell 82.8% for

the half, as the segment suffered from

deteriorating industry trends and a lagged

impact of efforts to reposition its brands

toward digital products. As noted, a benefit

will flow from these measures in 2H.

Earnings at The West declined 38.0% for

the half as the category remains challenged

by structural factors and a softening WA

economy.

Cash flow conversion in the half was a very

healthy 103%, however we had expected a

larger unlock of working capital around

the Olympics – which had been partly paid

for in previous periods.

Gearing ratios have risen given the

decline in earnings. Net debt declined by

$34.8m to $681.2m, but net debt/EBITDA

rose to 2.2x, up from 2.0x 6 months earlier.

Management noted that based on

seasonal timing of cash flows related to

content production, net debt will be

higher at 30 June. On our revised

estimates, ND/EBITDA at year end will be

~2.4x. Management remain committed to

working to reduce gearing going forward.

Seven cut its interim dividend from 4cps

to 2cps. While its payout ratio has typically

ranged close to 60%, we now expect a

payout ratio closer to 50%, given comments

above on gearing.

Six months ago, Seven said it was in

“advanced stages” on three international

production company opportunities, which

would help it further transform its revenue

mix away from traditional linear TV

advertising. It has since announced the

acquisition of Slim in the UK, and flagged

further expansion via acquisitions in

production assets is still planned.

Digital revenues (derived from 100% SWM-

owned businesses) are guided to grow by

over 150% for the year. Over half the

revenue base is represented by mobile,

video and native-focused advertising.

The Yahoo7 investment was written

down by $75.5m. This was attributed to a

deterioration in general market conditions

brought on by the accelerating shift from

premium display to programmatic

advertising; the loss of a NZ service contract

during the half; and market uncertainty due

to the ongoing delay of the potential

acquisition of Yahoo Inc by Verizon.

SWM noted that Yahoo Inc has announced

that the proposed Verizon transaction has

been delayed until the June quarter of 2017.

Capex guidance for FY17 was $30-40m

(Macq $35m), which is within SWM’s normal

range and will be used to fund strategic

initiatives.

SWM noted that it is seeking further licence

fee cuts in this year’s Federal budget in

May.

SWM noted that it expects its suite of early

stage businesses, which are currently loss-

making to reach profitability in the medium-

term.


9 March 2017 29

SXL


Group revenues rose by 9.2% to

$351.8m, driven by improved

advertising across both metro and

regional assets. This was offset by

high cost growth of 12.5%, resulting

in EBITDA growth of 1.3% to

$92.6m.

Metro radio delivered a decent half,

growing revenues by 7.1% vs. the

market at +1.5% (SXL revenue

excludes a -$4.4m one-off impact

from the renewed ATN contract).

Local sales were slightly down, while

national sales rose 11.4%, driven by

yield improvement. Southern Cross’

solid performance contrasts to

softness in APN’s radio business in

the December half (refer APN News

& Media – radio signal strengthening,

23 February 2017). The first radio

ratings survey is expected on March

14.

Metro radio EBITDA growth of 4.0%

was premised on strong top-line

trends, offset by 3.3% cost growth

from investments in talent, content

and revenue-related costs. Southern

Cross will continue to invest in

content, identifying the 2Day Sydney

breakfast show and National early-

drive show as key areas of focus.

Regional revenue growth of 15.0%

was driven by a 16.9% increase in

advertising revenues, which resulted

from the change in affiliation to Nine.

This was outweighed by cost growth

of 24.5% (or 23.4% ex NRIs),

resulting in an EBITDA decline of

3.2% (or 1.1% ex NRIs).

Regional TV advertising revenues

rose 28.7%, including 32.7% growth

for national sales and 24.2% growth

for local sales. As expected,

Southern Cross’ share in the three

markets it retransmits Nine’s signal

has moved higher since the

changeover in mid-2016, and its

power ratio in those markets

improved from 0.95x to 1.03x YoY.

The company believes that improved

programming from Nine (noting that

CY17 ratings have been stronger vs.

pcp) and the rollout of regional news

services will drive growth.

Southern Cross’ outlook for the ad

market has deteriorated since the

last result. Guidance commentary

noted that ad markets remain

“relatively short with low growth

forecast”, with management noting

on the call that they expect “low

single digit declines” for the

immediate future.

Guidance also softened, with the

company guiding to FY17 EBITDA at

the lower end of previous guidance

of $177-183m. The update to

guidance appears to be driven by

Southern Cross' softer view of the ad

market outlook. Guidance (if taken at

the lower end of $177m) implies

EBITDA growth of 5.5% for the year

and 10.6% for 2H (in line with our

expectations). Growth in 2H will be

driven by continued top-line growth

(particularly from regional TV).

Regional radio revenue growth of

2.8% was below the mid-single digit

growth rates of prior halves. This was

driven by softness in local sales

(~60% of regional radio revenues),

which grew by only 1.2% during the

half. This was attributed to the impact

of the affiliation change, which

shifted focus away from local sales

as the company retrained its

salesforce to sell Nine content. Local

sales should improve in 2H. National

sales were robust, up 7.5%, driven

by improved sales capabilities.

Group cost growth will be driven by

further investment in technology,

content and marketing, which the

company will look to partly offset

through back-office efficiencies.

EBITDA cash conversion in the

traditionally weaker December was

82%, primarily due to the timing of

annual licence fee payments. This is

nonetheless an improvement on the

74% conversion in pcp.

Cash fell by ~$47m during the half,

driven by debt repayment of $40m

and the acquisition of Authentic

Entertainment. Drawn debt sits at

$395m with a $100m undrawn facility

(that matures in January 2019).

Corporate revenue was generally

flat (ex a $2.4m gain on disposal in

1H16). The EBITDA loss declined by

$2.1m to $1.0m, benefiting from

lower licence fee cuts held over from

FY16, which was offset by higher

employee costs.

Net debt/EBITDA was 1.89x at 31

December 2016, unchanged from six

months ago and below the 2.60x

from 12 months ago. Net debt ticked

up slightly during the half, by $7.4m

to $347.8m, driven by the acquisition

of Authentic Entertainment. Southern

Cross is likely to continue to divest

non-core assets and reinvest the

proceeds in areas including content,

data and technology.

SXL is in the process of selling 45

transmission towers to Axicom

which will generate $12.6m

proceeds. Axicom will incur future

capex related to maintenance of the

towers. Completion is expected in

April subject to regulatory approval.

The incremental EBITDA loss will be

$1.5 to $2.0m, likely from FY18.

SXL enhanced its digital

capabilities with the acquisition of

Authentic Entertainment and the new

partnership with Vevo as its

exclusive Australian sales

representative. Vevo is a large

premium video platform, and the

acquisition significantly expands

SXL’s digital video inventory, which

is an increasing area of focus for

advertisers. Authentic

Entertainment is a digital and radio

content business, and Southern

Cross has brought the acquired

content creation capabilities in-

house.

Southern Cross reiterated its

advocacy for the need for media

reform legislation. It believes that

the industry is in urgent need of

reform, noting that current laws are

impeding regional media companies

from competing with digital and

global competition.

The tax rate in FY17 will be lower

than prior years (~28%) due to the

carry-forward of capital losses from

assets disposed of last year. The tax

rate will return to 30-31% from FY18.


9 March 2017 30

Source: Company data, Macquarie Research, March 2017

APN News and Media Limited (APN) $2.67Interim 1H16 2H16 1H17e 2H17e Full year CY16 CY17e CY18e CY19e

Sales revenue $m 129.1 169.5 221.4 268.8 Sales revenue $m 298.6 490.2 516.2 537.0

Other revenue $m 0.4 7.2 0.0 0.0 Other revenue $m 7.6 0.0 0.0 0.0

Opex $m 98.9 125.7 168.4 188.9 Opex $m 224.5 357.3 373.1 385.9

EBITDA (ex Associates) $m 30.7 51.0 53.0 80.0 EBITDA (ex Associates) $m 81.7 132.9 143.2 151.1

Depreciation $m 1.6 5.8 10.0 10.0 Depreciation $m 7.4 20.0 24.5 29.1

Amortisation $m 0.8 0.3 1.0 1.0 Amortisation $m 1.1 2.0 2.5 2.9

D&A $m 2.4 6.2 11.0 11.0 D&A $m 8.5 22.0 27.0 32.0

EBIT $m 28.3 44.8 42.0 69.0 EBIT $m 73.1 110.9 116.2 119.1

Associates $m 5.2 4.1 1.0 1.5 Associates $m 9.3 2.5 2.5 2.5

EBIT incl. assoc $m 33.5 48.9 43.0 70.5 EBIT incl. assoc $m 82.4 113.4 118.7 121.6

Net Interest Expense $m 12.1 5.5 4.0 3.8 Net Interest Expense $m 17.6 7.8 6.9 5.4

Pre-Tax Profit $m 21.4 43.3 39.0 66.6 Pre-Tax Profit $m 64.8 105.6 111.7 116.2

Tax Expense $m 8.0 8.6 10.8 18.3 Tax Expense $m 16.6 29.1 30.8 32.2

Net Profit $m 13.4 34.7 28.2 48.4 Net Profit $m 48.2 76.6 80.9 84.0

Minority Interests $m 3.3 3.3 3.3 3.3 Minority Interests $m 6.6 6.7 6.8 6.9

Adjusted Earnings $m 10.2 31.5 24.8 45.0 Adjusted Earnings $m 41.6 69.9 74.2 77.2

NRIs (net of tax) $m -267.1 219.4 0.0 0.0 NRIs (net of tax) $m -47.6 0.0 0.0 0.0

Reported Earnings $m -256.9 250.9 24.8 45.0 Reported Earnings $m -6.0 69.9 74.2 77.2


Adjusted Earnings (ex amortisation) $m 10.9 31.8 25.8 46.0 Adjusted Earnings (ex amortisation) $m 42.7 71.9 76.6 80.1

EPS (reported) cps -160.3 105.5 8.1 14.7 EPS (reported) cps -54.8 22.7 24.1 25.1

EPS (adj) cps 6.3 13.2 8.1 14.7 EPS (adj) cps 19.6 22.7 24.1 25.1

EPS (adj ex amortisation) cps 6.8 13.4 8.4 15.0 EPS (adj ex amortisation) cps 20.2 23.4 24.9 26.0

PER (reported) x -0.8 1.3 16.5 9.1 PER (reported) x -4.9 11.7 11.1 10.6

PER (adj) x 21.1 10.1 16.5 9.1 PER (adj) x 13.6 11.7 11.1 10.6

PER (adj ex amortisation) x 39.1 20.0 31.8 17.8 PER (adj ex amortisation) x 13.2 11.4 10.7 10.3

EPS grow th % (61.4%) (55.0%) 27.5% 10.7% EPS grow th % (57.3%) 16.2% 6.1% 4.1%

DPS cps - 4.0 3.2 5.9 DPS cps 4.0 9.1 9.6 10.0

Dividend yield % -% 1.5% 1.2% 2.2% Dividend yield % 1.5% 3.4% 3.6% 3.8%

Payout ratio (adj) % -% 30.2% 40.0% 40.0% Payout ratio (adj) % 20.4% 40.0% 40.0% 40.0%

FCF/sh cps 5.4 5.8 2.5 8.4 FCF/sh cps 11.2 10.9 17.2 19.8

FCFE yield (annualised) % 4.0% 4.3% 1.8% 6.3% FCFE yield (annualised) % 4.2% 4.1% 6.4% 7.4%

EBITDA margin % 23.7% 30.1% 23.9% 29.7% EBITDA margin % 27.3% 27.1% 27.7% 28.1%

EBIT margin % 21.9% 26.4% 19.0% 25.7% EBIT margin % 24.5% 22.6% 22.5% 22.2%

EBITDA grow th % (54.1%) (41.8%) 72.7% 56.8% EBITDA grow th % (47.1%) 62.8% 7.7% 5.6%

EBIT grow th % (41.5%) (36.6%) 48.3% 53.9% EBIT grow th % (38.5%) 51.7% 4.7% 2.5%

Profit and Loss Ratios CY16 CY17e CY18e CY19e Cashflow Analysis CY16 CY17e CY18e CY19e

Other revenue grow th % (64.5%) 60.1% 5.3% 4.0% EBITDA $m 115.1 132.9 143.2 151.1

EBITDA grow th % (47.1%) 62.8% 7.7% 5.6% Ch in Working Capital $m (6.6) 0.9 (0.1) (0.1)

% of EBITDA in 1H % 39.9% 40.1% 40.2% 40.3% Net Interest Paid $m 19.7 7.8 6.9 5.4

Effective Tax Rate % 0.3 0.3 0.3 0.3 Tax Paid $m 23.3 29.1 30.8 32.2

EV/EBIT x 5.9 8.4 7.8 7.4 Other $m 5.2 2.5 2.5 2.5

EV/EBITDA x 8.3 7.2 6.5 5.9 Operating Cashflow $m 70.7 99.5 107.8 115.9

EV/Sales x 2.2 1.9 1.8 1.7 Acquisitions $m 270.2 - - -

Capex $m 14.9 66.0 55.0 55.0

Balance Sheet Ratios CY16 CY17e CY18e CY19e Asset Sales $m 37.8 - - -

Other $m (12.4) - - -

ROE % 0.1% 8.9% 8.9% 8.8% Investing Cashflow $m (259.6) (66.0) (55.0) (55.0)

ROFE % 8.9% 12.7% 12.7% 12.4% Dividends Paid $m - (19.5) (28.6) (30.1)

ROA % 6.3% 9.2% 9.4% 9.5% Equity movements $m 442.7 - - -

Net Debt $m 146.9 132.9 108.7 77.9 Debt movements $m (311.9) (14.0) (24.2) (30.9)

Net Debt/Equity x 0.3 0.2 0.1 0.1 Other $m 89.9 - - -

Net Debt/EBITDA x 1.8 1.0 0.8 0.5 Financing Cashflow $m 220.7 (33.5) (52.8) (60.9)

Interest Cover (EBIT) x 4.1 14.2 16.8 22.0

EFPOWA m 199.0 307.5 307.5 307.5 Net Cashflow $m 31.8 - - -

Balance Sheet CY16 CY17e CY18e CY19e

Cash $m 20.2 20.2 20.2 20.2

Receivables $m 86.4 107.5 113.2 117.9

Inventories $m 2.2 - - -

Investments $m 12.3 12.3 12.3 12.3

PP&E $m 93.8 139.8 170.3 196.2

Intangibles $m 882.8 880.8 878.4 875.5

Other Assets $m 47.2 47.2 47.2 47.2

Total Assets $m 1,144.9 1,207.8 1,241.5 1,269.2

Payables $m 92.2 113.6 119.4 124.2

Short Term Debt $m - - - -

Long Term Debt $m 161.3 147.3 123.1 92.3

Snapshot Current Provisions $m 37.1 37.1 37.1 37.1

Current price $ 2.67 Other Liabilities $m 17.8 22.9 29.4 36.0

EFPOWA # 307.5 Total Liabilities $m 308.4 320.9 309.0 289.6

Market cap $m 821.0 Shareholders Funds $m 800.6 857.7 910.0 964.0

Net debt $m 146.9 Minority Interests $m 35.9 29.2 22.5 15.6

EV $m 967.9 Shaereholder Equity $m 836.5 886.9 932.5 979.6


9 March 2017 31


Fairfax Media (FXJ) $0.95Interim 1H17 2H17e 1H18e 2H18e Full year FY16 FY17e FY18e FY19e

Revenue $m 903.5 854.3 901.0 848.0 Revenue $m 1,832.1 1,757.7 1,749.0 1,743.0

Opex $m 758.6 729.6 756.2 720.1 Opex $m 1,548.8 1,488.2 1,476.3 1,468.3

EBITDA $m 144.9 124.7 144.8 127.8 EBITDA $m 283.3 269.6 272.7 274.8



D&A $m 18.3 24.1 22.0 22.0 D&A $m 70.1 42.4 44.0 43.9

EBIT $m 126.6 100.6 122.9 105.8 EBIT $m 213.2 227.2 228.7 230.9









NRIs (net of tax) $m -1.0 0.0 0.0 0.0 NRIs (net of tax) $m -1,026.1 -1.0 0.0 0.0

Reported Earnings $m 83.7 61.6 76.0 66.6 Reported Earnings $m -893.6 145.3 142.7 145.6

EPS (Adj/dil) cps 3.7 2.7 3.3 2.9 EPS (Adj/dil) cps 5.7 6.4 6.2 6.3

EPS Grow th % 8.0% 16.9% (10.2%) 8.2% EPS Grow th % (6.7%) 11.6% (2.5%) 2.1%

DPS cps 2.0 2.0 2.0 2.0 DPS cps 4.0 4.0 4.0 4.0

Dividend yield % 2.1% 2.1% 2.1% 2.1% Dividend yield % 4.2% 4.2% 4.2% 4.2%

Payout ratio (adj) % 54.3% 74.7% 60.5% 69.0% Payout ratio (adj) % 70.2% 62.9% 64.5% 63.2%





EBITDA grow th % (10.1%) 2.0% (0.0%) 2.5% EBITDA grow th % (2.1%) (4.9%) 1.1% 0.8%

EBIT Grow th % 0.2% 15.9% (3.0%) 5.2% EBIT Grow th % (5.0%) 6.6% 0.6% 1.0%

Profit and Loss Ratios FY16 FY17e FY18e FY19e Cashflow Analysis FY16 FY17e FY18e FY19e

Revenue grow th % (1.2%) (4.1%) (0.5%) (0.3%) EBITDA $m 283.3 269.6 272.7 274.8

% of EBITDA in 1H % 56.9% 53.7% 53.1% 52.7% Ch in Working Capital $m 37.9 (1.3) (0.9) (0.6)

Effective Tax Rate % 29.7% 28.0% 29.0% 29.0% Net Interest Paid $m 13.9 11.9 13.8 11.8

PER (adj) x 16.7 14.9 15.3 15.0 Tax Paid $m 51.0 47.8 61.2 62.3

EV/EBIT x -2.5 10.5 10.1 9.8 Other $m (52.9) (63.1) - -


EV/Sales x 1.2 1.3 1.3 1.3 Acquisitions $m (46.1) (7.1) - -

Capex $m (95.0) (95.0) (75.0) (75.0)

Balance Sheet Ratios FY16 FY17e FY18e FY19e Asset Sales $m 68.5 10.7 - -

Other $m (31.6) (0.3) - -


ROFE % 18.8% 18.6% 18.4% 18.3% Dividends Paid $m (93.5) (92.0) (92.0) (92.0)

ROA % 10.5% 14.5% 14.4% 14.4% Equity movements $m (73.9) (1.7) - -

Net Debt (pro-forma) $m 88.7 145.5 113.9 79.7 Debt movements $m (109.9) 89.7 (31.5) (34.2)

Net Debt/Equity x 0.1 0.1 0.1 0.1 Other $m (9.2) (15.2) - -

Net Debt/EBITDA x 0.3 0.5 0.4 0.3 Financing Cashflow $m (286.4) (19.2) (123.5) (126.2)

Interest Cover (EBIT) x -80.9 21.8 16.6 19.5

EFPOWA m 2383.4 2299.5 2299.5 2299.5 Net Cashflow $m (262.9) 37.1 - (0.0)

Balance Sheet FY16 FY17e FY18e FY19e

Cash $m 81.1 118.4 118.4 118.4

Receivables $m 342.6 285.8 283.7 282.4

Inventories $m 29.6 28.1 27.9 27.7

Investments $m - - - -

PP&E $m 150.3 178.0 203.6 229.3

Intangibles $m 754.3 771.3 771.3 771.3

Other Assets $m 286.2 315.5 309.9 304.2

Total Assets $m 1,644.1 1,697.0 1,714.7 1,733.3

Payables $m 250.8 191.9 190.5 189.6

Short Term Debt $m - 96.6 96.6 96.6

Long Term Debt $m 179.3 176.7 145.2 111.0



EFPOWA # 2,299.5 Total Liabilities $m 610.1 627.5 594.5 559.4

Market cap $m 2,184.5 Shareholders Funds $m 910.9 937.9 988.6 1,042.3


EV $m 2,300.4 Shaereholder Equity $m 1,034.1 1,069.6 1,120.3 1,173.9


9 March 2017 32


Carsales.com (CAR) $11.20Interim 1H17 2H17e 1H18e 2H18e Full year FY16 FY17e FY18e FY19e

Revenue $m 178.6 187.8 189.8 200.7 Revenue $m 344.0 366.4 390.6 417.3

Opex $m 95.3 93.8 101.3 101.4 Opex $m 173.7 189.1 202.7 214.8

EBITDA $m 83.2 94.1 88.5 99.4 EBITDA $m 170.3 177.3 187.9 202.5

D&A $m 4.6 4.5 4.4 4.3 D&A $m 7.5 9.1 8.7 8.2

EBIT $m 78.7 89.5 84.1 95.1 EBIT $m 162.8 168.2 179.2 194.3









NRIs (net of tax) $m -6.1 0.0 0.0 0.0 NRIs (net of tax) $m 1.9 -6.1 0.0 0.0

Reported Earnings $m 47.2 61.9 58.2 66.5 Reported Earnings $m 109.2 109.1 124.7 137.1


EPS Grow th % 5.5% 8.4% 9.1% 7.5% EPS Grow th % 6.9% 7.1% 8.3% 10.0%

DPS cps 18.7 21.0 19.8 22.6 DPS cps 37.3 39.7 42.4 46.6



FCFE cps 19.8 26.3 23.5 29.0 FCFE cps 46.2 46.1 52.5 56.9




EBITDA grow th % 2.2% 5.9% 6.4% 5.6% EBITDA grow th % 10.3% 4.1% 6.0% 7.8%

EBIT Grow th % 1.7% 4.8% 7.0% 6.2% EBIT Grow th % 8.8% 3.3% 6.6% 8.4%


Revenue Grow th % 10.3% 6.5% 6.6% 6.8% EBITDA $m 170.3 177.3 187.9 202.5

% of EBITDA in 1H % 47.9% 44.8% 47.1% 47.1% Ch in Working Capital $m 2.2 5.2 1.0 1.0



EV/EBIT x 17.7 16.9 15.7 14.3 Other $m -2.1 -5.0 0.0 0.0


EV/Sales x 8.4 7.7 7.2 6.7 Acquisitions $m 39.2 1.3 0.0 0.0

Capex $m 3.4 2.2 2.2 2.2

Balance Sheet Ratios FY16 FY17e FY18e FY19e Asset Sales $m 0.0 0.0 0.0 0.0

Other $m 4.9 19.6 0.0 0.0

ROE % 44.4% 43.8% 44.3% 45.0% Investing Cashflow $m -37.8 16.1 -2.2 -2.2

ROFE % 37.1% 40.9% 43.9% 47.9% Dividends Paid $m 89.1 91.4 98.4 107.3

ROA % 31.4% 31.2% 33.8% 36.9% Equity movements $m 2.2 0.3 0.0 0.0

Net Debt $m 198.2 159.8 131.8 101.9 Debt movements $m 12.0 -22.9 -28.0 -29.9

Net Debt/Equity x 0.8 0.6 0.4 0.3 Other $m 0.0 0.0 0.0 0.0

Net Debt/EBITDA x 0.9 0.7 0.5 0.3 Financing Cashflow $m -75.0 -114.0 -126.5 -137.3


EFPOWA m 240.6 241.1 241.1 241.1 Net Cashflow $m 1.9 15.4 0.0 0.0

Divisional estimates FY16 FY17e FY18e FY19e Balance Sheet FY16 FY17e FY18e FY19e

Private $m 51.1 63.1 67.5 72.3 Cash $m 28.7 44.1 44.1 44.1

Dealer $m 123.8 134.9 141.4 148.2 Receivables $m 44.7 48.4 51.7 55.2

Corporate display $m 65.8 69.0 72.5 76.1 Inventories $m 1.1 0.7 0.7 0.7

Data & research $m 35.9 41.4 43.9 46.5 Investments $m 267.0 232.9 232.9 232.9

Stratton Finance $m 63.0 50.4 57.0 65.2 PP&E $m 6.6 7.8 10.1 12.3

International $m 4.4 7.5 8.3 9.1 Intangibles $m 191.6 189.1 180.4 172.2

Other Assets $m 6.1 8.8 8.7 8.4

Total revenue $m 344.0 366.4 390.6 417.3 Total Assets $m 545.8 531.8 528.5 525.8

Payables $m 36.2 34.3 36.6 39.1

Short Term Debt $m 1.8 2.0 2.0 2.0

Snapshot Current Long Term Debt $m 225.1 201.9 173.9 143.9

Current price $ 11.11 Provisions $m 7.3 7.7 7.7 7.7

EFPOWA # 241.0 Other Liabilities $m 15.0 12.0 12.0 12.0

Market cap $m 2,677.3 Total Liabilities $m 285.4 257.9 232.2 204.8

Net debt $m 178.1 Shareholders Funds $m 256.2 270.1 292.5 317.2

EV $m 2,855.4 Minority Interests $m 4.2 3.8 3.8 3.8

Shaereholder Equity $m 260.4 273.9 296.3 321.0


9 March 2017 33


Nine Entertainment Co (NEC) $1.00Interim 1H16 2H16 1H17 2H17e Full year FY16 FY17e FY18e FY19e

Revenue $m 691.5 590.9 656.5 593.3 Revenue $m 1,282.4 1,249.9 1,267.3 1,268.5

Opex $m 565.0 517.7 537.1 538.7 Opex $m 1,082.7 1,075.7 1,086.5 1,096.2

EBITDA $m 126.5 73.2 119.5 54.7 EBITDA $m 199.6 174.2 180.8 172.3



D&A $m 15.6 16.7 18.3 14.1 D&A $m 32.3 32.4 32.8 33.2

EBIT $m 110.9 56.4 101.1 40.6 EBIT $m 167.3 141.8 148.0 139.0









NRIs (net of tax) $m 239.4 144.4 -311.9 0.0 NRIs (net of tax) $m -85.3 -311.9 -9.0 0.0

Reported Earnings $m 320.8 181.5 -236.9 20.5 Reported Earnings $m 33.2 -215.3 94.1 96.4


EPS Grow th % (3.2%) (24.0%) (5.8%) (44.3%) EPS Grow th % (10.9%) (18.0%) 7.9% (6.5%)

DPS cps 8.0 4.0 4.5 4.3 DPS cps 12.0 8.8 9.5 8.8



FCF/sh cps 3.9 -4.9 -5.9 -1.2 FCF/sh cps -0.9 -7.1 5.7 5.5

FCFE yield (annualised) % 7.8% (9.7%) (11.8%) (2.4%) FCFE yield (annualised) % (0.9%) (7.1%) 5.7% 5.5%



EBITDA grow th % (25.2%) (36.3%) (5.5%) (25.2%) EBITDA grow th % (29.7%) (12.8%) 3.8% (4.7%)

EBIT grow th % (20.4%) (33.2%) (8.8%) (28.0%) EBIT grow th % (25.2%) (15.3%) 4.4% (6.1%)

Key assumptions 1H16 2H16 1H17 2H17e Key assumptions FY16 FY17e FY18e FY19e

Metro TV ad market grow th (5-city) % (0.4%) (3.9%) (4.5%) (2.0%) Metro TV ad market grow th (5-city) % (2.0%) (3.4%) -% -%

Nine share of TV ad market (5-city) % 38.2% 35.4% 35.0% 35.6% Nine share of TV ad market (5-city) % 36.9% 36.0% 36.5% 36.5%


Revenue grow th % (20.4%) (2.5%) 1.4% 0.1% EBITDA $m 199.6 174.2 180.8 172.3




EV/EBIT x 17.0 -5.7 6.8 7.4 Other $m (75.8) (116.9) 1.7 1.8

EV/EBITDA x 5.3 6.4 5.7 6.1 Operating Cashflow $m 50.3 -24.1 87.9 86.0

EV/Sales x 0.8 0.9 0.8 0.8 Acquisitions $m 106.0 17.4 - -

Capex $m 58.0 37.5 38.0 38.1

Balance Sheet Ratios FY16 FY17e FY18e FY19e Asset Sales $m 534.7 134.1 111.0 -

Other $m - - - -

ROE % 2.9% (19.6%) 9.7% 9.7% Investing Cashflow $m 370.7 79.2 73.0 (38.1)


ROA % 9.0% 8.3% 8.7% 8.1% Equity movements $m (49.0) - - -

Adj Net Debt $m 177.6 237.0 152.6 178.3 Debt movements $m (357.5) 69.5 (84.4) 25.8

Adj Net Debt/Equity x 0.1 0.2 0.2 0.2 Other $m (36.7) (40.1) - -

Adj Net Debt/EBITDA x 0.9 1.3 0.8 1.0 Financing Cashflow $m (558.0) (44.5) (160.9) (48.0)


EFPOWA m 883.6 871.4 871.4 871.4 Net Cashflow $m (137.0) 10.5 - 0.0


TV $m 1,130.0 1,083.3 1,094.1 1,088.4 Cash $m 42.9 53.3 53.3 53.3

Events (sold in 1H16) $m - - - - Receivables $m 345.8 363.0 388.9 415.1

Digital $m 149.9 166.5 173.2 180.1 Inventories $m 139.2 171.5 188.5 205.7

Total revenue $m 1,279.9 1,249.9 1,267.3 1,268.5 Investments $m - - - -

TV $m 183.5 154.1 159.4 149.5 PP&E $m 123.3 120.7 123.2 136.5

Events (sold in 1H16) $m - - - - Intangibles $m 1,044.1 827.9 719.6 711.1

Digital $m 26.0 27.5 28.6 29.7 Other Assets $m 309.5 253.5 254.1 254.7

Other $m (9.8) (7.4) (7.2) (7.0) Total Assets $m 2,004.7 1,790.1 1,727.7 1,776.4

Total EBITDA $m 199.6 174.2 180.8 172.3 Payables $m 375.7 386.5 390.9 391.2

Short Term Debt $m 0.1 - - -

Long Term Debt $m 220.4 290.3 205.9 231.7



EFPOWA # 884 Total Liabilities $m 770.9 827.7 747.7 773.8

Market cap $m 884 Shareholders Funds $m 1,233.8 962.4 980.0 1,002.6

Net debt $m 178 Minority Interests $m - - - -

EV $m 1,061 Shaereholder Equity $m 1,233.8 962.4 980.0 1,002.6


9 March 2017 34


News Corp (NWS, NWSA) All figures in USD $12.66Interim 1H17a 2H17e 1H18e 2H18e Full year FY16a FY17e FY18e FY19e

Revenue $m 4,081.0 3,794.6 3,954.8 3,710.3 Revenue $m 8,292.0 7,875.6 7,665.1 7,591.2

Opex $m 3,622.0 3,359.2 3,431.0 3,259.4 Opex $m 7,431.0 6,981.2 6,690.4 6,563.3

EBITDA $m 459.0 435.3 523.8 450.9 EBITDA $m 861.0 894.3 974.7 1,027.9

D&A $m 240.0 238.4 223.2 226.9 D&A $m 505.0 478.4 450.1 422.7

EBIT $m 219.0 196.9 300.6 224.0 EBIT $m 356.0 415.9 524.6 605.2

Associates $m -15.0 25.0 18.5 15.0 Associates $m 30.0 10.0 33.4 39.2


Net Interest Expense $m -22.0 -26.0 -27.0 -27.7 Net Interest Expense $m -43.0 -48.0 -54.7 -57.8






NRIs (net of tax) $m -409.0 372.2 0.0 0.0 NRIs (net of tax) $m -70.0 -36.9 0.0 0.0

Reported Earnings $m -305.0 519.9 201.1 148.8 Reported Earnings $m 162.0 214.9 349.9 401.4

EPS (reported) cps -52.5 89.5 34.6 25.6 EPS (reported) cps 27.9 37.0 60.2 69.1


PER (reported) x -12.1 7.1 18.3 24.7 PER (reported) x 45.4 34.2 21.0 18.3

PER (adj) x 35.4 24.9 18.3 24.7 PER (adj) x 31.7 29.2 21.0 18.3

EPS Grow th (adj) % (28.8%) 71.8% 93.3% 0.7% EPS Grow th (adj) % (14.9%) 8.5% 39.0% 14.7%

DPS cps 10.0 10.0 10.0 10.0 DPS cps 20.0 20.0 20.0 20.0



FCF/sh cps -17.9 98.5 49.9 53.9 FCF/sh cps 119.9 80.6 103.9 108.1

FCFE yield (annualised) % (2.8%) 15.6% 7.9% 8.5% FCFE yield (annualised) % 9.5% 6.4% 8.2% 8.5%



EBITDA grow th % 0.4% 7.7% 14.1% 3.6% EBITDA grow th % (4.5%) 3.9% 9.0% 5.5%

EBIT grow th % 2.8% 37.7% 37.3% 13.8% EBIT grow th % (4.3%) 16.8% 26.1% 15.4%

Profit and Loss Ratios FY16a FY17e FY18e FY19e Cashflow Analysis FY16a FY17e FY18e FY19e

Revenue grow th % (3.9%) (5.0%) (2.7%) (1.0%) EBITDA $m 861.0 894.3 974.7 1,027.9

EBITDA grow th % (4.5%) 3.9% 9.0% 5.5% Ch in Working Capital $m 161.0 (4.9) 20.4 7.8

% of EBITDA in 1H % 53.1% 51.3% 53.7% 53.6% Net Interest Paid $m (43.0) (48.0) (54.7) (57.8)


EV/EBIT x 16.6 13.3 9.6 7.5 Other $m 34.0 10.0 33.4 39.2


EV/Sales x 0.7 0.7 0.7 0.6 Acquisitions $m (478.0) (342.0) - -

Capex $m (256.0) (306.0) (306.0) (306.0)

Balance Sheet Ratios FY16a FY17e FY18e FY19e Asset Sales $m - 59.0 - -

Other $m (390.0) 273.0 - -

ROE % 2.0% 2.2% 3.0% 3.3% Investing Cashflow $m (1,124.0) (316.0) (306.0) (306.0)

ROFE % 3.4% 4.4% 5.6% 6.6% Dividends Paid $m (147.0) (135.1) (116.2) (116.2)

ROA % 1.7% 1.9% 2.8% 3.3% Equity movements $m (41.0) - - -

Net Debt $m -1463.0 -1810.2 -2297.4 -2809.1 Debt movements $m 342.0 - - -

Net Debt/Equity x -0.1 -0.2 -0.2 -0.2 Other $m (4.0) (21.0) - -

Net Debt/EBITDA x -1.7 -2.0 -2.4 -2.7 Financing Cashflow $m 150.0 (156.1) (116.2) (116.2)

Interest Cover (EBIT) x -8.3 -8.7 -9.6 -10.5

EFPOWA m 580.7 581.0 581.0 581.0 Net Cashflow $m (22.0) 302.2 487.2 511.7

Divisional EBITDA estimates FY16a FY17e FY18e FY19e Balance Sheet FY16a FY17e FY18e FY19e

New s & Information Services $m 494.0 403.6 384.2 376.6 Cash $m 1,832.0 2,101.2 2,588.4 3,100.1

Digital Real Estate $m 222.0 298.3 398.8 464.6 Receivables $m 1,229.0 1,154.0 1,128.3 1,118.5

Book Publishing $m 185.0 222.5 222.5 222.5 Inventories $m - - - -

Cable Netw orks (Fox Sports) $m 124.0 125.0 119.2 114.3 Investments $m 2,270.0 1,932.0 1,932.0 1,932.0

Other (including Education) $m (164.0) (155.0) (150.0) (150.0) PP&E $m 2,405.0 1,940.6 1,796.5 1,679.8

Total EBITDA $m 861.0 894.3 974.7 1,027.9 Intangibles $m 5,921.0 6,089.0 6,089.0 6,089.0

Other Assets $m 1,826.0 1,433.0 1,433.0 1,433.0

Share of Associate profit (Foxtel) $m 30.0 10.0 33.4 39.2 Total Assets $m 15,483.0 14,649.8 14,967.3 15,352.4

Payables $m 217.0 236.0 230.8 228.8

Short Term Debt $m - - - -

Long Term Debt $m 369.0 291.0 291.0 291.0

Snapshot Current Provisions $m - - - -

Current price $ 12.66 Other Liabilities $m 3,115.0 2,791.0 2,791.0 2,791.0

EFPOWA # 581.0 Total Liabilities $m 3,701.0 3,318.0 3,312.8 3,310.8

Market cap $m 7,354.8 Shareholders Funds $m 11,564.0 11,029.7 11,263.3 11,548.6

Net debt $m (1,296.0) Minority Interests $m 218.0 302.1 391.2 493.1

EV $m 6,058.8 Shaereholder Equity $m 11,782.0 11,331.7 11,654.5 12,041.6


9 March 2017 35


oOh!media Limited (OML) $4.43Interim 1H16 2H16 1H17e 2H17e Full year CY16 CY17e CY18e CY19e


Opex $m 119.9 142.7 136.7 152.9 Opex $m 262.6 289.6 299.3 307.8

EBITDA $m 26.8 46.8 34.6 57.0 EBITDA $m 73.5 91.6 94.1 95.4


Amortisation - PPA $m 4.8 5.4 4.8 5.9 Amortisation - PPA $m 10.1 10.6 10.6 10.6

Amortisation - Other $m 0.6 0.6 0.6 0.6 Amortisation - Other $m 1.3 1.3 1.3 1.3

D&A $m 12.6 15.1 14.9 16.5 D&A $m 27.7 31.4 32.6 31.8

EBIT $m 14.2 31.7 19.6 40.5 EBIT $m 45.9 60.1 61.5 63.6

Associates $m 0.1 -0.1 0.0 0.0 Associates $m 0.0 0.0 0.0 0.0






Minority Interests $m 0.0 -0.1 0.0 0.0 Minority Interests $m -0.1 0.0 0.0 0.0


NRIs (net of tax) $m 0.0 -2.7 -0.4 0.0 NRIs (net of tax) $m -2.7 -0.4 0.0 0.0


EPS (reported) cps 4.0 10.0 6.1 15.0 EPS (reported) cps 14.0 21.1 22.1 23.6


PER (reported) x 55.5 22.2 36.0 14.8 PER (reported) x 31.7 20.9 20.0 18.8

PER (adj) x 30.9 14.6 23.9 11.9 PER (adj) x 19.8 15.9 15.5 14.7

DPS cps 4.0 10.0 5.0 10.7 DPS cps 14.0 15.7 16.2 16.9



FCF/sh cps -6.6 16.1 14.1 9.5 FCF/sh cps 9.7 23.6 31.8 32.7

FCFE yield (annualised) % (3.0%) 7.3% 6.4% 4.3% FCFE yield (annualised) % 2.2% 5.3% 7.2% 7.4%




EBIT grow th % 60.5% 19.0% 38.6% 27.7% EBIT grow th % 29.3% 31.1% 2.2% 3.5%

Profit and Loss Ratios CY16 CY17e CY18e CY19e Cashflow Analysis CY16 CY17e CY18e CY19e

Revenue grow th % 20.1% 13.4% 3.2% 2.5% EBITDA $m 73.5 91.6 94.1 95.4

EBITDA grow th % 27.4% 24.5% 2.7% 1.4% Ch in Working Capital $m 9.4 2.6 (0.9) (0.8)

% of EBITDA in 1H % 36.4% 37.8% 37.7% 37.7% Net Interest Paid $m 5.4 5.1 4.4 3.3


EV/EBIT x 18.9 13.9 13.1 12.2 Other $m (10.2) - - -



Capex $m 39.0 30.0 15.9 16.0

Balance Sheet Ratios CY16 CY17e CY18e CY19e Asset Sales $m - - - -

Other $m (3.7) (3.0) - -




Net Debt $m 114.2 103.0 77.8 51.2 Debt movements $m 18.0 (11.2) (25.2) (26.7)

Net Debt/Equity x 0.2 0.1 0.1 0.1 Other $m (1.2) - - -

Net Debt/EBITDA x 1.6 1.1 0.8 0.5 Financing Cashflow $m 62.5 (35.8) (52.1) (53.6)


EFPOWA m 156.0 164.1 164.1 164.1 Net Cashflow $m (7.0) 0.5 - -

Divisional revenue estimatesCY16 CY17e CY18e CY19e Balance Sheet CY16 CY17e CY18e CY19e

Road $m 124.6 134.6 138.6 142.1 Cash $m 8.2 8.2 8.2 8.2

Retail $m 109.2 115.7 119.2 122.2 Receivables $m 79.4 84.0 86.7 88.8

Fly $m 56.0 58.2 60.0 61.5 Inventories $m 0.6 - - -

Place $m 28.9 46.3 48.6 49.8 Investments $m - - - -

Australia $m 318.7 354.8 366.4 375.5 PP&E $m 102.8 113.3 108.5 104.7

NZ $m 9.8 10.8 11.1 11.4 Intangibles $m 329.4 317.5 305.5 293.6

Total revenue $m 328.5 365.6 377.5 386.9 Other Assets $m 18.3 20.8 20.7 20.7

Total Assets $m 538.6 543.7 529.6 516.1

Payables $m 47.9 54.6 56.3 57.7


Long Term Debt $m 122.3 111.2 86.0 59.3




Market cap $m 691.0 Shareholders Funds $m 328.2 338.3 347.7 359.4

Net debt $m 114.2 Minority Interests $m (1.4) (1.4) (1.4) (1.4)



9 March 2017 36


REA Group (REA) $55.22Interim 1H16 2H16 1H17 2H17e Full year FY16 FY17e FY18e FY19e


Opex $m 128.9 153.5 135.5 149.2 Opex $m 282.5 284.7 321.5 345.2

EBITDA $m 185.9 161.4 201.8 183.2 EBITDA $m 347.3 385.0 461.4 511.1

D&A $m 15.8 19.2 17.9 17.5 D&A $m 34.9 35.4 35.5 36.3

EBIT $m 170.1 142.3 184.0 165.7 EBIT $m 312.4 349.6 425.9 474.8

Associates $m -5.9 -8.0 -1.8 -1.5 Associates $m -13.9 -3.2 -1.2 1.1


Net Interest Expense $m -0.7 7.2 6.2 3.1 Net Interest Expense $m 6.5 9.4 1.9 0.5






NRIs (net of tax) $m 0.0 52.6 170.4 0.0 NRIs (net of tax) $m 52.6 170.4 0.0 0.0



EPS Grow th % 21.9% 1.9% 5.8% 33.5% EPS Grow th % 12.5% 17.6% 25.4% 12.5%

DPS cps 36.0 45.5 40.0 49.6 DPS cps 81.5 89.6 112.3 176.9



FCFE yield % 2.7% 2.3% 3.1% 2.9% FCFE yield % 2.5% 3.0% 4.0% 4.5%




EBIT grow th % 29.5% 11.6% 8.1% 16.4% EBIT grow th % 20.7% 11.9% 21.8% 11.5%

Key assumptions 1H16 2H16 1H17 2H17e Key assumptions FY16 FY17e FY18e FY19e

ARPA ($/month) k 3,655 3,238 3,875 3,497 ARPA ($/month) k 3,355 3,657 4,096 4,342

Paying agents % 10,340 10,720 10,858 11,042 Paying agents % 10,720 11,042 11,373 11,715

Total agent reveunues k 243 219 272 250 Total agent reveunues k 462 522 603 658

% Depth agent revenues % 88.7% 87.5% 89.7% 90.0% % Depth agent revenues % 88.1% 89.9% 90.0% 90.0%



% of EBITDA in 1H % 53.5% 52.4% 52.9% 52.9% Ch in Working Capital $m -19.1 -19.2 3.9 6.0

Effective Tax Rate % 26.6% 30.0% 30.0% 30.0% Net Interest Paid $m -3.3 -9.4 -1.9 -0.5

PER (adj) x 36.2 30.8 24.6 21.9 Tax Paid $m -100.9 -95.4 -126.8 -142.6

EV/EBIT x 21.8 14.1 17.0 14.9 Other $m -2.7 -1.8 0.0 0.0


EV/Sales x 12.1 10.9 9.2 8.3 Acquisitions $m -528.9 -69.1 -98.4 0.0

Capex $m -40.0 -41.2 -42.5 -43.7

Balance Sheet Ratios FY16 FY17e FY18e FY19e Asset Sales $m 0.0 194.0 0.0 0.0

Other $m 0.0 -6.2 0.0 0.0

ROE % 39.8% 46.8% 26.8% 26.4% Investing Cashflow $m -568.9 77.6 -140.8 -43.7

ROFE % 28.9% 33.3% 37.1% 41.2% Dividends Paid $m -100.8 -112.8 -131.1 -185.6

ROA % 32.1% 25.3% 29.0% 30.9% Equity movements $m 0.0 -1.3 0.0 0.0

Net Debt $m 365.4 26.2 -38.4 -183.1 Debt movements $m 498.0 -183.8 35.4 -44.7

Net Debt/Equity x 0.1 0.0 0.0 0.0 Other $m -2.0 0.0 0.0 0.0

Net Debt/EBITDA x 1.1 0.1 -0.1 -0.4 Financing Cashflow $m 395.3 -297.8 -95.8 -230.3




Australia $m 555.2 620.9 712.5 772.1 Cash $m 126.8 166.3 266.3 366.3

Europe $m 50.7 - - - Receivables $m 96.5 93.8 115.9 126.7

Asia $m 23.9 48.8 70.3 84.3 Inventories $m 0.0 0.0 0.0 0.0

Total revenue $m 629.8 669.7 782.8 856.4 Investments $m 281.8 357.7 454.9 456.0

Australia $m 345.9 396.1 469.5 517.1 PP&E $m 16.2 12.8 12.2 11.9

Europe $m 9.1 - - - Intangibles $m 955.4 932.6 940.2 948.0

Asia $m 9.3 6.6 10.6 13.6 Other Assets $m 6.6 6.3 6.3 6.3

Corporate $m (16.9) (17.8) (18.7) (19.6) Total Assets $m 1483.3 1569.5 1795.7 1915.2



Long Term Debt $m 492.3 192.5 227.8 183.2




Market cap $m 7,273.3 Shareholders Funds $m 715.2 1021.9 1186.7 1333.9




9 March 2017 37


SEEK (SEK) $15.13Interim 1H17 2H17E 1H18E 2H18E Full year FY16 FY17E FY18E FY19E

Revenue $m 487.9 492.2 526.6 554.2 Revenue $m 950.4 980.1 1,080.8 1,202.1

Opex $m 304.1 305.6 244.7 426.4 Opex $m 583.4 609.7 671.1 741.1

EBITDA $m 183.8 186.6 281.9 127.8 EBITDA $m 367.0 370.4 409.7 460.9


Amort. of intangibles (ex PPA) $m 13.9 14.3 15.1 15.1 Amort. of intangibles (ex PPA) $m 26.8 28.2 30.2 31.9

Amort. of share-based compensation $m 3.7 7.3 8.5 8.5 Amort. of share-based compensation $m 18.4 11.0 17.0 17.5

D&A (ex PPA amort.) $m 24.3 28.7 31.0 31.4 D&A (ex PPA amort.) $m 58.9 53.0 62.4 66.4

EBIT $m 159.5 157.9 250.9 96.4 EBIT $m 308.1 317.4 347.3 394.6








Adjusted profit (ex PPA amort.) $m 104.6 96.6 166.1 51.1 Adjusted profit (ex PPA amort.) $m 187.7 201.2 217.2 247.0

Amortisation of PPA (pre tax) $m 5.3 2.2 2.0 1.1 Amortisation of PPA (pre tax) $m 12.9 7.5 3.1 0.0

NRIs (net of tax) $m -15.3 0.5 0.5 0.1 NRIs (net of tax) $m 182.3 -14.7 0.6 0.0

Reported profit $m 84.1 94.9 164.6 50.1 Reported profit $m 357.1 179.0 214.7 247.0

Adjusted EPS (ex PPA amort.) cps 30.3 27.8 47.9 14.7 Adjusted EPS (ex PPA amort.) cps 54.6 58.1 62.6 71.2

Adjusted EPS grow th % 10.8% 2.1% 58.2% (47.1%) Adjusted EPS grow th % (5.9%) 6.4% 7.8% 13.7%

Reported EPS cps 24.3 27.3 47.4 14.4 Reported EPS cps 103.9 51.7 61.9 71.2

Reported EPS grow th % (69.6%) 14.9% 95.0% (47.2%) Reported EPS grow th % 26.3% (50.3%) 19.7% 15.0%

DPS cps 23.0 19.5 33.5 10.3 DPS cps 40.0 42.5 43.8 49.8







EBITDA grow th % (4.9%) 7.4% 53.4% (31.5%) EBITDA grow th % 5.2% 0.9% 10.6% 12.5%

EBIT grow th % (2.9%) 9.9% 57.3% (39.0%) EBIT grow th % 1.5% 3.0% 9.4% 13.6%

Profit and Loss Ratios FY16 FY17E FY18E FY19E Cashflow Analysis FY16 FY17E FY18E FY19E


% of EBITDA in 1H % 52.7% 49.6% 68.8% 67.6% Ch in Working Capital $m (49.4) 23.2 0.4 0.5



EV/EBIT x 9.7 18.3 15.3 13.1 Other $m (15.3) - - -



Capex $m 54.9 50.0 50.0 50.0

Balance Sheet Ratios FY16 FY17E FY18E FY19E Asset Sales $m 331.6 - - -

Other $m 29.5 29.7 - -

ROE % 10.4% 10.9% 11.4% 12.3% Investing Cashflow $m 267.2 (20.3) (50.0) (50.0)



Net Debt $m 317.8 331.4 274.5 134.7 Debt movements $m (184.7) 55.9 3.1 (79.8)

Net Debt/Equity x 0.2 0.2 0.1 0.1 Other $m (215.7) - - -

Net Debt/EBITDA x 0.9 0.9 0.7 0.3 Financing Cashflow $m (525.9) (89.7) (180.8) (244.2)



Divisional EBITDA estimates FY16 FY17E FY18E FY19E Balance Sheet FY16 FY17E FY18E FY19E

Classif ieds (Australia) $m 175.5 196.8 213.9 236.0 Cash $m 504.9 558.5 618.5 678.5

Classif ieds (Zhaopin) $m 79.7 86.6 102.5 121.7 Receivables $m 98.5 120.0 135.1 151.8

Classif ieds (Seek Asia) $m 75.8 76.6 84.2 92.6 Inventories $m - - - -

Seek Learning $m -1.9 -1.0 0.0 0.0 Investments $m 81.0 68.1 84.0 100.7

Brasil Online $m 34.0 29.6 26.2 27.0 PP&E $m 28.1 35.8 70.6 103.7

OCC Mexico $m 9.3 7.1 8.0 8.8 Intangibles $m 2,388.3 2,363.7 2,313.4 2,264.0

International other $m -5.4 -4.2 -4.2 -4.2 Other Assets $m 177.6 171.2 171.2 171.2

Total EBITDA $m 367.0 391.4 430.7 481.9 Total Assets $m 3,278.4 3,317.3 3,392.8 3,469.8

Payables $m 118.3 116.6 131.3 147.5

Short Term Debt $m 71.1 48.6 48.6 48.6

Long Term Debt $m 751.6 841.3 844.4 764.6



EFPOWA # 346 Total Liabilities $m 1,453.8 1,453.0 1,454.9 1,397.2

Market cap $m 5,232 Shareholders Funds $m 1,355.2 1,361.5 1,392.3 1,475.0

Net debt $m 364 Minority Interests $m 469.4 502.9 545.6 597.7

EV $m 5,596 Shaereholder Equity $m 1,824.6 1,864.4 1,938.0 2,072.6


9 March 2017 38


Southern Cross Media Group (SXL) $1.29Interim 1H17 2H17E 1H18E 2H18E Full year FY16 FY17E FY18E FY19E


Opex $m 259.5 274.1 273.8 279.1 Opex $m 474.9 533.6 552.9 567.5

EBITDA (inc Associates) $m 92.3 85.0 95.1 84.7 EBITDA (inc Associates) $m 167.4 177.3 179.8 179.1



D&A $m 15.5 15.6 15.6 15.1 D&A $m 28.9 31.0 30.6 30.6

EBIT $m 76.8 69.4 79.5 69.6 EBIT $m 138.6 146.3 149.1 148.4









NRIs (net of tax) $m 0.0 0.0 0.0 0.0 NRIs (net of tax) $m 0.0 0.0 0.0 0.0



EPS Grow th % 11.7% 28.9% 3.2% (1.0%) EPS Grow th % 15.0% 19.2% 1.2% 0.4%

DPS cps 3.8 4.0 4.6 3.9 DPS cps 6.8 7.7 8.5 8.5







EBITDA grow th % 1.1% 11.7% 3.1% (0.4%) EBITDA grow th % 2.7% 5.9% 1.4% (0.4%)

EBIT grow th % (0.1%) 12.6% 3.5% 0.2% EBIT grow th % 3.0% 5.5% 2.0% (0.5%)

Key assumptions 1H17 2H17E 1H18E 2H18E Key assumptions FY16 FY17E FY18E FY19E

Metro radio ad market grow th % 1.5% 3.0% 3.0% 3.0% Metro radio ad market grow th % 5.9% 2.2% 3.0% 2.5%

SXL implied metro radio share % 31.6% 32.5% 31.5% 31.5% SXL implied metro radio share % 31.2% 31.5% 31.5% 31.5%

Regional TV ad market grow th % (1.4%) (2.0%) -% -% Regional TV ad market grow th % (6.2%) (1.7%) -% -%

SXL implied regional TV share % 33.9% 37.2% 37.0% 38.0% SXL implied regional TV share % 28.3% 35.5% 37.5% 38.0%

Profit and Loss Ratios FY16 FY17E FY18E FY19E Cashflow Analysis FY16 FY17E FY18E FY19E





EV/EBIT x 9.8 9.1 8.8 8.6 Other $m 109.8 (3.3) (3.3) (3.3)


EV/Sales x 2.1 1.9 1.8 1.7 Acquisitions $m - - - -

Capex $m 23.3 30.0 25.0 25.0

Balance Sheet Ratios FY16 FY17E FY18E FY19E Asset Sales $m 16.1 12.6 - -

Other $m (0.1) (7.1) - -



ROA % 9.7% 11.5% 11.6% 11.6% Equity movements $m - - - -

Net debt $m 340.2 335.2 305.9 277.0 Debt movements $m (215.0) (76.8) (29.3) (28.8)

Adj Net Debt/Equity x 0.3 0.3 0.3 0.3 Other $m 14.3 (0.1) - -

Adj Net Debt/EBITDA x 2.0 1.9 1.7 1.5 Financing Cashflow $m (234.3) (132.6) (94.9) (95.1)


EFPOWA m 768.6 769.0 769.3 769.6 Net Cashflow $m (48.6) (47.6) (0.3) (0.3)

Divisional estimates FY16 FY17E FY18E FY19E Balance Sheet FY16 FY17E FY18E FY19E

Metro radio $m 242.3 254.0 257.2 263.6 Cash $m 94.8 47.4 47.4 47.4

Regional radio $m 169.0 176.1 179.8 183.6 Receivables $m 144.7 159.6 161.7 164.3

Regional TV $m 213.3 263.1 277.9 281.6 Inventories $m - - - -

Corporate $m 17.8 17.8 17.8 17.8 Investments $m 3.7 4.0 4.0 4.0

Total revenue $m 642.3 710.9 732.7 746.6 PP&E $m 145.2 144.7 139.1 133.5

Metro radio $m 51.4 56.4 53.7 54.0 Intangibles $m 1,289.5 1,298.4 1,298.4 1,298.4

Regional TV & radio $m 131.2 130.9 136.1 135.1 Other Assets $m 9.9 8.6 8.6 8.6

Corporate $m (14.9) (10.0) (10.0) (10.0) Total Assets $m 1,687.8 1,662.7 1,659.2 1,656.2


Short Term Debt $m 36.0 36.0 36.0 36.0

Long Term Debt $m 433.9 357.5 328.2 299.3



EFPOWA # 769 Total Liabilities $m 707.6 635.0 606.9 579.8

Market cap $m 992 Shareholders Funds $m 979.9 1,027.5 1,051.9 1,076.1

Net debt $m 348 Minority Interests $m 0.3 0.3 0.3 0.3

EV $m 1,340 Shaereholder Equity $m 980.1 1,027.8 1,052.2 1,076.4


9 March 2017 39


TEN Network Holdings

Year End 31 August 1H16 2H16 1H17E 2H17E FY16 FY17E FY18E FY19E

Profit & Loss

Sales

Sales revenue $m 334.2 342.2 345.9 354.2 676.4 700.1 696.8 711.0

Total Revenue $m 334.2 342.2 345.9 354.2 676.4 700.1 696.8 711.0

Operating Costs $m 324.1 347.8 336.8 361.6 671.9 698.4 704.3 690.6

EBITDA ex associate profits $m 10.1 (5.6) 9.1 (7.4) 4.5 1.7 (7.5) 20.4

- Depreciation & Amortisation $m 6.9 4.9 6.6 6.6 11.8 13.1 11.4 9.8

EBIT consolidated $m 3.3 (10.6) 2.5 (14.0) (7.3) (11.5) (18.9) 10.5

EBIT non-recurring $m 23.7 (149.0) - - (125.3) - - -

Share of Associates profits $m - - 0.7 (0.7) - - - -

Total EBIT $m 27.0 (159.6) 3.2 (14.6) (132.6) (11.5) (18.9) 10.5

- Net Interest Expense $m 9.3 9.8 3.3 3.4 19.11 6.67 7.09 6.86

Pretax Profit $m 17.7 (169.4) (0.1) (18.0) (151.7) (18.1) (26.0) 3.7

- Tax Expense $m 2.6 0.2 (0.0) 2.0 2.7 1.9 2.8 1.1

Profit before minorities $m 15.2 (169.6) (0.1) (20.0) (154.4) (20.1) (28.8) 2.6

- Minority Interests $m 1.8 0.6 1.8 0.8 2.4 2.6 2.9 3.2

Reported Profit $m 13.4 (170.2) (1.9) (20.8) (156.8) (22.7) (31.7) (0.6)

Adjusted Profit $m (10.4) (21.1) (1.9) (20.8) (31.5) (22.7) (31.7) (0.6)

Gross Cashflow $m (1.7) (15.5) 6.5 (13.4) (17.3) (6.9) (17.4) 12.5

EPS (adj) ¢ (3.1) (5.7) (0.5) (5.6) (8.9) (6.1) (8.5) (0.2)

CFPS ¢ (0.5) (4.2) 1.8 (3.6) (4.9) (1.9) (4.7) 3.4

DPS ¢ - - - - - - - -

Special DPS ¢ - - - - - - - -

Total dividend per share ¢ - - - - - - - -

Franking % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Year End 31 August 1H16 2H16 1H17E 2H17E FY16 FY17E FY18E FY19E

Cashflow Analysis

EBITDA $m 10.1 (5.6) 9.1 (7.4) 4.5 1.7 (7.5) 20.4

- Increase in Working Capital $m 19.0 5.3 (2.2) 2.5 24.3 0.3 (0.5) 2.2

- Net Interest Paid $m 0.6 0.5 3.3 3.4 1.1 6.7 7.1 6.9

- Tax Paid $m (0.6) 2.5 (0.0) 2.0 2.0 1.9 2.8 1.1

+ Other $m (18.8) (9.7) - - (20.2) - 25.0 -

Net Cash Used in Operating $m (27.7) (23.7) 8.0 (15.3) (51.4) (7.3) 8.1 10.3

+ Proceeds from Sale of PP&E $m 0.0 0.0 - - 0.0 - - -

+ Proceeds from Sale of Invest's & Bus's $m - 1.4 - - 1.4 - - -

- Capex $m 1.9 7.3 3.0 3.0 9.2 6.0 6.0 6.0

- Acquisitions & Investments $m - 1.0 - - 1.0 - - -

+ Other $m (0.7) 1.9 - - 1.2 - - -

Net Cash Used in Investing $m (2.6) (5.0) (3.0) (3.0) (7.6) (6.0) (6.0) (6.0)

- Dividends Paid $m - 2.5 - - 2.5 - - -

+ Equity Movements (inc. DRP) $m 146.4 (0.1) - - 146.2 - - -

+ Debt Movements $m (111.9) 30.0 - - (81.9) - - -

+ Other $m (0.7) 0.7 - - - - - -

Net Cash from Financing $m 33.7 28.1 - - 61.8 - - -

+ Net Exchange Rate Differences $m (0.0) (2.3) - - (2.4) - - -

Net Cash movement $m 1.4 (1.0) 5.0 (18.3) 0.4 (13.3) 2.1 4.3

Year End 31 August FY16 FY17E FY18E FY19E

Trading Information Balance Sheet ($m)

Share Price ($) 0.55$ Cash 14.8 1.5 3.6 7.9

Shares on Issue (m) 370.8 Debtors 104.7 97.0 96.6 98.6

Market capitalisation (A$m) 203.9 Inventory 154.0 165.0 164.2 167.5

Other 5.7 5.7 5.7 5.7

Current Assets 279.2 269.2 270.1 279.7

Fixed Assets 42.2 35.0 29.6 25.8

Other 12.7 6.5 - -

Intangibles 346.5 346.5 346.5 346.5

Total Assets 680.7 657.3 646.2 652.0

Creditors 152.3 155.3 154.5 157.7

Short Term Debt - - - -

Other 16.3 16.3 16.3 16.3

Current Liabilities 168.6 171.6 170.8 174.0

Long Term Debt 90.2 90.2 90.2 90.2

Other Liabilities 39.0 35.4 56.8 60.0

Total Liabilities 297.9 297.2 317.9 324.2

Net Assets 382.8 360.1 328.4 327.8

Debt related derivatives - - - -

Net debt 75.4 88.7 86.6 82.3


9 March 2017 40

Important disclosures:

Recommendation definitions

Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield

Macquarie – Asia/Europe Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie – South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie - Canada

Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return

Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return

Volatility index definition*

This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be

expected to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only

Recommendations – 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations

Financial definitions

All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).

Recommendation proportions – For quarter ending 31 December 2016

AU/NZ Asia RSA USA CA EUR Outperform 57.53% 50.72% 45.57% 42.28% 60.58% 52.79% (for global coverage by Macquarie, 8.71% of stocks followed are investment banking clients)

Neutral 33.90% 33.97% 43.04% 50.11% 37.23% 35.62% (for global coverage by Macquarie, 8.05% of stocks followed are investment banking clients)

Underperform 8.56% 15.30% 11.39% 7.61% 2.19% 11.59% (for global coverage by Macquarie, 4.63% of stocks followed are investment banking clients)

Company-specific disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures.

Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group’s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN 58 002 832 126, AFSL 238947, a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities Limited ABN 41 002 574 923 AFSL 237504 ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited (“MENZ”) an NZX Firm. Macquarie Private Wealth’s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542, AFSL No. 237502) (“MBL”) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Apart from Macquarie Bank Limited ABN 46 008 583 542 (MBL), any MGL subsidiary noted in this research, , is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary’s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research contains general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group‘s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures © Macquarie Group

This publication was disseminated on 08 March 2017 at 14:29 UTC.

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