After a big acquisition what are Nine Entertainment shares worth?

Nine Entertainment Co Holdings Ltd (ASX: NEC) has this week finalised the $805 million acquisition of QMS Media, a major outdoor advertising company, which it bought from Quadrant Private Equity.

The analyst team at Macquarie took the opportunity to run the ruler over the company following the deal being bedded down, and has a bullish stock price on Nine Entertainment shares, which we’ll get to later. Firstly, what did Nine buy?

Major new business division

Nine said, on announcing the deal in January, that:

QMS is a leading digital outdoor media platform with operations in Australia and New Zealand. With a footprint concentrated in metro areas, QMS adds a digitally focused and growing media platform that complements Nine’s existing media assets, whilst also benefiting from being part of the broader Nine Group.

They also noted that the outdoor advertising category had been a “standout performer” in the Australian advertising market, growing by about 9% annually from 2014 through to 2025, and expanding its share of the market from 10% to 18% over that period.

QMS itself was also estimated to have grown its share of the market from about 10% in 2019 to about 15% in 2025, Nine said, “through a combination of high-profile tender wins, new site builds and digitisation of billboards”.

Nine said this week that it expects the acquisition of QMS to hit the bottom line immediately.

The company said:

Nine continues to expect QMS to contribute $92m of EBITDA in FY26 on a pro forma … basis (inclusive of outdoor lease expenses). Inclusive of full run-rate cost synergies of $20m, and adjusted for current interest rates, this equates to mid single digit earnings per share accretion. Following completion, Nine’s digital growth assets (Stan, 9Now, digital mastheads and Outdoor) are estimated to contribute more than 60% of Group revenue in FY27, up from approximately 45% in FY25.

Nine Chief Executive Officer Matt Stanton said it was a “defining moment” for Nine.

QMS is a high-growth, digitally-led business that complements our existing premium content and data capabilities. With the addition of QMS, we can offer advertisers an unparalleled cross-platform reach, while diversifying our revenue streams towards structural growth areas. Now the acquisition is complete, we are finalising the alignment of the Nine and QMS go to market sales strategies which will allow clients to capitalise on this powerful combination.

Nine Entertainment shares looking cheap

The Macquarie team said following the QMS acquisition, that Nine “should be better placed to deliver more consistent growth, although broadcast challenges need to be tamed with cost-out”.

Macquarie has a price target of  $1.15 per share on Nine shares, compared with 97 cents currently.

Nine is also expected to pay a dividend yield of 6.3% this year. The company is valued at $1.51 billion.

The post After a big acquisition what are Nine Entertainment shares worth? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nine Entertainment. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.