Today’s news of a major new player on the Australian TV scene has resulted in a sell-off in Nine Entertainment and a test of critical chart support.
CBS gets serious in Australia
In a surprise result, CBS has emerged as the winning bidder for Ten Network.
The Australian TV market is a tough gig. Shareholders in rivals Nine Entertainment and Seven West Media now face yet another strategic threat. This comes in the form of the most watched TV network in the US which has deep pockets and a large content bank
Australian success is far from assured for CBS. However it has clearly decided that the best way to capitalise on the $800m debt owed to it by Ten Network is to take direct control and have a real crack. For starters it has announced that its streaming subscription service, CBS All Access will be made available to Australian clients. This is a fledgling competitor to Netflix in the US and will be new completion for Nine’s partly owned Australian subsidiary, Stan.
Nine Entertainments is down 3% so far today in nervous trading.
This sees it testing support below a double top pattern. A clear break of this support would be a bearish chart signal.
Nine is trading at around 11.3 times forward earnings but has recovered from a valuation of 7 times earnings a little over a year ago. This suggests some potential for a correction if the chart support does break
For potential sellers, one factor to bear in mind is that Nine’s final dividend is 5c. The stock goes ex dividend on 4 September