Nine Entertainment (ASX:NEC) Surges 5% on $850M QMS Deal: Is This Media Turnaround a Buy?

Nine Entertainment bets big on digital billboards as it exits radio

Nine Entertainment (ASX: NEC) jumped 5% on Friday after announcing a major shake-up that tells investors exactly where management sees the future of Australian media. The company is spending A$850 million to buy digital billboard operator QMS Media while selling off its iconic radio stations for just A$56 million. This isn’t a minor tweak to the business. In our view, it’s the clearest signal yet that Nine Entertainment is abandoning traditional broadcasting and betting its future entirely on digital advertising. The question for investors is whether this bold pivot justifies buying at current levels.

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Nine Buys Into Digital Billboards While Traditional Media Fades

So why is Nine Entertainment paying A$850 million for a billboard company? The answer lies in what QMS actually owns. This isn’t a business of static paper posters; it’s a high-tech digital network where ads can be updated across the country in seconds. QMS operates a network that is 95% digital, including the exclusive contract to run advertising across Sydney’s CBD. Those digital screens on bus shelters, kiosks, and street furniture throughout the city centre? That’s QMS, reaching millions of people every week.

What makes this compelling is how it fits with Nine’s existing assets. The company already owns television, streaming, newspapers, and digital platforms. Adding outdoor advertising means Nine can now offer advertisers a complete package. This suggests meaningful revenue synergies as Nine Entertainment bundles deals across multiple channels, something competitors simply cannot match.

The price looks reasonable, too. Nine is paying around 6.8 times QMS’s expected annual earnings, which we believe is fair for a business growing at double-digit rates. If management delivers on promised cost savings, the deal economics improve further.

Why Nine is Walking Away From Radio

The radio sale reveals even more about management’s thinking. Nine is selling 2GB, 3AW, 4BC, 6PR, and several other stations to hotel billionaire Arthur Laundy for just A$56 million. These are household names in Australian media, yet Nine is letting them go cheaply. This indicates management sees radio as a dying business, not worth fighting for.

The logic makes sense. Radio audiences are ageing, and advertising revenue keeps shrinking. Rather than pour money into decline, Nine Entertainment is freeing up attention for growth areas. The company is also handing off regional television to WIN Network, further simplifying operations.

The key takeaway here is structural change. Digital businesses will jump from 45% of Nine’s revenue today to over 60% by 2027. That’s a fundamentally different company from what investors owned a year ago.

The Investor’s Takeaway for Nine Entertainment

At A$1.14 per share, Nine Entertainment trades at a modest valuation for a business undergoing genuine transformation. We believe the risk-reward looks attractive for investors with a 12-18 month horizon who can stomach some near-term uncertainty.

The bull case is straightforward: if Nine integrates QMS smoothly and advertising markets hold up, the combined business should deliver stronger earnings growth than the old Nine ever could. Analyst price targets averaging around A$1.70-A$1.80 suggest meaningful upside from here.

However, income investors should note that dividends over the next two years will likely be unfranked due to tax restructuring. If you rely on franking credits, this affects your returns.

The main risk is execution, though we consider this manageable rather than alarming. Nine’s management has navigated major transitions before, and the QMS business comes with long-term contracts providing revenue visibility. If advertising markets weaken sharply, synergy targets could disappoint, but this isn’t our base case.

For growth-oriented investors seeking media exposure, Nine now offers a cleaner, more digital-focused business than at any point in its history. At current prices, we see this as a buying opportunity.