The Fairfax Media Limited (ASX: FXJ) share price hit a 52-week low of 58.5 cents this morning despite the multi-media group releasing no specific news to the market. The weak operational performance of the group is also pulling down the share price of its proposed merger partner free-to-air tv broadcaster Nine Entertainment Co Holdings Ltd (ASX: NEC).
The merger or takeover as some have described it is due to be implemented on 7 December 2018 providing it gets approval from the courts and Fairfax shareholders over the month of November.
Since plans for the merger were revealed on July 26 the Nine share price has fallen around 37%, although it sees opportunity in one particular part of Fairfax’s multiple online media operations.
Fairfax retained a 60% ownership stake in Domain Holdings Australia Ltd (ASX: DHG) after the November 2017 initial public offering of the operator of the domain.com.au property website and it remains its star growth asset alongside online streaming business Stan.
It’s believed Nine Entertainment is keen on the takeover as it thinks it can promote the domain.com.au website further using the long reach of its popular Channel 9 TV entertainment and sports shows.
Unfortunately for Nine and Fairfax shareholders domain’s performance has disappointing seen its IPO, with the shares hitting a record low of $2.40 today.
This is on the back of a weak trading update in October that showed Domain’s total revenue for the first 15 week of FY 2019 was down 1%.
Compare this to REA Group Limited (ASX: REA) as the operator of realestate.com.au that just posted 17% revenue growth for the first quarter of FY 2019.
REA Group is majority owned by News Corp (ASX: NWS) and it has even been speculated that it may enter into a minor commercial advertising agreement with Seven West Media Ltd (ASX: SWM) in part response to the Nine / Fairfax media.
Not long after the Domain Group IPO its CEO resigned amid accusations from the Fairfax media itself that he was a ‘party boy’, while Fairfax’s own flagship news services like The Sydney Morning Herald and The Age continue to post flat-to-falling revenues.
However, it’s the surprisingly weak numbers from Domain that are dragging the share prices of three separately listed businesses down for now.
Domain blamed the weak start to the year on lower property listings in Sydney and Melbourne as confidence in housing markets falters, while it also flagged it expects pro forma total costs to rise in the mid-to-high single digits.
This means that Domain could potentially end up posting a profit fall in its first full financial year as a listed business, which is not the start Fairfax or Nine investors are hoping for.
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Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. 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 Scott Phillips.
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