Motley Fool Australia

Buying shares in Ten Network Holdings Limited? You may as well set fire to your cash

set money on fire

Ten Network Holdings Limited (ASX: TEN) has seen its share price soar more than 12% today, with some investors obviously confident the troubled free-to-air broadcaster won’t only survive, but will prosper in future too.

Still, those bargain hunters may be looking at the 81% fall in the share price over the past year and thinking that the shares are cheap at under 20 cents each.

Ten’s shares have traded as high at $1.48 over the past year, but it’s been all downhill since October 2016.

That’s despite positive news about the reduction in television licence fees the commercial broadcaster had been clamouring for. In May, Ten posted a huge $232 million loss for just the six months to end of February 2017, driven by a writedown of $214.5 million on the value of its TV licence.

But there’s no getting away from the fact that the commercial television sector faces structural decline, particularly in advertising revenue. Reality TV, sports and news seem to be the only three categories of TV shows that free-to-air networks now show, and many consumers and households are simply switching to better services. Who wouldn’t when Netflix, Stan and online streaming services like Apple, Amazon and Google offer cheap, ad-free alternatives.

And they aren’t the only alternatives, with SBS and the ABC offering catch-up services as well.

The relaxation of the reach rule could see a white knight take over Ten – most likely News Corp (ASX: NWS), but even then, the broadcaster needs something special to turn around its performance – something I wouldn’t bank on.

Foolish takeaway

As the biggest loser compared to relative thoroughbreds Nine Entertainment Co Holdings Ltd (ASX: NEC) and Seven West Media Ltd (ASX: SWM), the Ten Network may not have much life left in it before it’s put down. There are better options out there for Foolish investors, like the ideas below.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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