Should You Buy Ten Network Holdings Ltd Shares Today?

What Happened to the TEN Share Price?

Ten Network Holdings Limited [ASX:TEN] made a 1.09% gain by 1:17pm today. The stock was trading at $0.233 a share. The Aussie market opened lower before regaining some lost ground by midday. Weak commodity prices and fear on Wall Street prompted selling on the market. More speculations of a June rate hike from the Federal Reserve are adding to the downward pressure in equity markets around the world.

Why Did This Happen to TEN Shares?

There is no turning back for Channel Ten. The struggling television station saw its share price shrink from $4 to the now 23cents in the last ten years. Channel Ten has struggled to improve its program ratings, which are needed to rejuvenate its advertising revenue.

The financials of the company are a mess. Average sales growth over the last five years has been a negative 6.98%. The company is losing money and has a negative net profit margin of 6.9 in the last five years. While there is hope for higher revenue next year, earnings per share is widely believed to report losses. The long term growth rate for the company’s earnings is also negative.

Given the company’s terrible shape, market analysts are still giving the stock an average rating of ‘hold’. Regardless of analyst ratings, there is every reason for an investor to be nervous about this company.

What Now for TEN Network Holdings Limited?

What has happened to Channel Ten is not a unique event. The shift away from television towards digital media is the root cause for the stock’s declining value.
There is much rumour around a potential takeover by private equity firms such as Discovery, Anchorage Capital, and Saban Capital. Bruce Gordon, a current shareholder who owns 15% of the company, is opposed to the deals. He believes these US companies will not be able to add any value.

At this point, value is centered on a structural shift towards digital media. If the new management can successfully reinvent the company’s business model, then the stock may very well be saved. However, such a transformation would be a difficult uphill battle.

For investors, the decision is very simple. Why buy into companies or sectors that will likely not recover? The value lost from non-performing assets has simply transferred to assets that do perform. In this case, it is technology and digital media companies.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor


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