Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Dear James and MM Team, I would appreciate your thoughts on NEC and CTD. They are both well under average analyst valuations, yet over the last 3, 6 and 12 months have both underperformed the ASX by quite some margin (especially CTD over 3 months). Are these stocks deep value diamonds or canines to be avoided? I note that you do hold NEC in your Emerging Companies Portfolio and that it pays a healthy dividend. Thanks, Charles
Hi Charles
Corportae Travel (CTD) : CTD does feel like its starting to offer some value as it approaches $16 but with consensus expectations of a recession in 2023/4 its hard to see investors chasing this stock higher. Discretionary spending is expected to contract significantly next year as billions of dollars worth of home loans revert from fixed to flexible reducing the free cash in many Australians’ pockets.
We like this business but its not cheap trading on a 25x valuation for 2023 hence its not on our Christmas shopping list.
Nine Entertainment (NEC) : last month we purchased NEC for our Emerging Companies Portfolio which by definition provides you with an answer i.e. MM likes NEC here.
In our view, the market is too bearish on its broadcasting division plus we also see further upside in their Stan investment with rising Average Revenue Per User (ARPU) as well as strong momentum in sales. Nine have also flagged the potential to divest some of its interest here which could further unlock value for shareholders. At just 11x expected FY23 PE, Nine is undervalued and recent numbers suggest the underlying business is holding up better than expected.
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