NZME shares unpopular early on after listing

Fund managers say no one is talking about NZME. 

UPDATED 3:05PM: The NZX has clarified NZME's listing price of $1 was "solely related to NZX system requirements and is not indicative of any underlying valuation, or expected trading valuation, of NZME."

However, the company's demerger document says "based on the pro forma NZME balance sheet, as at 31 December 2015, NZME's shareholders' equity on demerger is expected to be approximately NZ$280.6 million."

NZME's market capitalisation at the current trade of 84c is $165 million, making a $1 listing close to the company's expected valuation.

New Zealand Media and Entertainment [NZX: NZM] shares found their first trade at 86c, more than one hour after listing on the NZX at midday, as fund managers show little interest. 

The latest share price of 84c is shown on the NZX as 16% below the $1 listing price.

The media company listed today after being demerged from its Australian parent company APN News & Media via an in specie distribution. Less than 1% of NZME is owned by New Zealand investors, with the remainder held mostly by Australian investors. The shares list on the ASX at 2pm (NZT).

Investors are clearly not arriving at a consensus on NZME’s value at this stage, with the highest buy price 85c, with four potential buyers in the market at that price. The lowest sell price is 98c with one seller in the market – but it originally asked for $1.05. The stock listed at $1.

NZME listed on the NZX at a turbulent time for global stocks following the UK’s exit from the EU but Craigs Investment Partners senior investment adviser Nigel Scott says the listing being in-specie distribution rather than an IPO means it will there will be little impact.

"There has not been a lot of conversation about it from a market perspective. It’s not a normal listing, it’s just a split out from the APN stock. The quote is an 85c bid but there are no sellers here at the moment.

“It’s great to see another stock here but it’s not an IPO raising money and investors are taking a while … I don't think anyone [at Craigs] has been to a meeting about it."

Several other fund managers confirmed to NBR the listing was not a big talking point in the market.

Forsyth Barr released an investment summary earlier this month outlining the risks and valuations of the media company’s listing.

“Although it will be readily apparent to investors that NZME operates in a challenged industry, there is value in the company’s tail of strong free cashflow, solid radio business, a possible merger with Fairfax NZ, its strong domestic brands and audiences and delivery of local content,” the summary says.

"There are pros and cons. A traditional media business is more likely to trade on lower multiples," Harbour Asset Management director Shane Solly says. "Others are saying this is a great exposure to the New Zealand economy."

He also says there is "a lot of change occurring in the media industry at the moment and it is a difficult time for the business to be coming to market."

"Does NZME become a transtasman orphan in the near term? Maybe it does," he said.

Such risks are highlighted in the report over the long-term outlook of NZME’s core business and many factors that could impact the company’s valuation. Forsyth Barr forecast the valuation at $116-396 million.

Regulatory and shareholder approval for the split was given earlier this month. Some 99.98% of APN shareholders voted in favour of the demerger.

(With reporting from BusinessDesk)

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