SOTP value unlock — 35%+ upside (at A$1.1/share)
This idea was shared by Duncan.
At its core, this is a classic sum-of-the-parts value unlock story, just still in the early innings. The path to unlocking that value seems pretty straightforward, and there’s a high chance it plays out this year, with a potential upside of around 40%.
NZME Limited is a major force in New Zealand’s media landscape. The company owns about 50% of the newspaper market (anchored by The New Zealand Herald), holds 40% share in the radio market, and owns OneRoof, the country’s 2nd/3rd largest real estate classifieds site. NZME is listed on New Zealand’s and Australia’s stock exchanges.
The company’s been poorly managed for years, with the stock left to trade at a steep discount to its underlying asset value. However, recent developments suggest the tide may finally be turning.
At the end of February, management announced a strategic review of OneRoof to “realize its full potential in delivering value for shareholders,” with options including a potential separation of the business. Management promised more details on the review at the time of H1 2025 results in August.
Following this announcement, billionaire activist Jim Grenon has quickly built a 13.5% stake (including 3.5% owned by his affiliate) and launched a proxy fight to replace NZME’s board at the AGM on April 29. Grenon has nominated 4 out of 5 directors, including himself as a chairman, and claims to already have support from ~47% of outstanding shares. Known for turning around beaten-up oil & gas companies, he intends to bring the same playbook for NZME’s core media business. He’s also made it clear that monetizing OneRoof will be a priority—just not in a way that’s designed to “prop up the core business”. The most likely option, according to him, is a clean spin-off of OneRoof via a separate public listing, with shares distributed directly to existing NZME shareholders.
Another activist Osmium Partners (6.5% stake) has nominated 2 directors of its own. Osmium hasn’t detailed a clear action plan, however, it has a strong track record of successful activism—often leading to full company sales. Osmium had previously highlighted that around 20 of its public company investments have resulted in takeovers, and that the fund was actively involved in many of them.
So there are two separate catalysts at play: the board overhaul at the AGM next month and the potential monetization or separation of OneRoof. At this stage, the activist win seems pretty much inevitable.
The more important catalyst is the separation of OneRoof. This would effectively split NZME into two distinct pure-play businesses: legacy media and real estate classifieds. It’s not surprising that, in the current combined structure, the market doesn’t fully recognise the standalone value of these segments. The businesses are fundamentally different and warrant different approaches to valuation.
The media side is mature, slow-growing, and still working through a long-running print-to-digital transition. Meanwhile, OneRoof is still a tiny operation, which isn’t yet contributing meaningfully to the earnings, but it’s growing quickly and has a real shot at becoming a leading player in New Zealand’s RE classifieds market. That kind of business model deserves a very different valuation multiple to the traditional media.
I have initially thought that in the current holding structure the market was overlooking the value of OneRoof. However, Grenon thinks it is the other way round—that it is actually the core media business that the market is currently undervaluing:
Finally, while it is encouraging to see revenue growth and positive EBITDA in the OneRoof results in 2024, and the market values it highly on a prospective basis, its actual impact on NZME earnings is relatively minor so far. […] I believe the value of the NZME stock is currently driven primarily by two things. One is the standalone value of OneRoof, which many seem to think is $0.50 per share or more, and the other is the dividends (which are also somewhat of a proxy for the success of the operations).
Either way, a clean separation should unlock the underlying value of the both businesses. The most likely scenario is NZME’s current management gets ousted next month, paving the way for an accelerated monetization of OneRoof.
The board initiated a strategic review of OneRoof last month, before Grenon entering the scene. So there’s already some internal momentum ongoing in the right direction. Given the current spotlight and the activist pressure, it’s hard to imagine that management would eventually backpedal, even if they are somehow able to win at the AGM. So the monetization/separation of OneRoof is bound to happen no matter who takes over the control.
That said, the odds of activists failing seem very low. And having someone like Grenon in charge will be a material positive for the SOTP unlock thesis. Not just because he’ll likely push through a faster and cleaner spin-off of OneRoof, but also because he intends to launch a turnaround for the media business, which should support the valuation of the RemainCo.
My conservative SOTP valuation comes out to A$1.49/share, implying 35% upside from current levels. Using a more aggressive valuation for OneRoof, as hinted by Grenon, the SOTP lands at A$1.66/share, suggesting 51% upside.
The setup looks compelling not only because of a solid shot at value unlock later on this year. The downside to unaffected levels is limited to low double digits. NZME itself is cheap. It’s a stable, profitable, market leading business with almost no leverage. However, partially due to the current holdco structure, the company trades at just 4.5x TTM EBITDA. Lastly, while we wait for the catalysts to play out, NZME generates 8% in dividend yield.
Below is a bit more background on the company/situation, along with an overview of my SOTP assumptions.
NZME Background
NZME operates 3 segments:
- Publishing (58% of 2024 revenues): digital and print newspapers, including “The New Zealand Herald” (one of the country’s most popular outlets).
- Audio (34%): owned and operated radio stations, including Newstalk ZB and ZM, among others.
- OneRoof (8%): NZME’s crown jewel asset, the real estate listing platform. Worth noting that digital listings account for around 60% of OneRoof’s revenues, the rest gets generated from OneRoof’s real estate focused printed magazines.
Most of the revenue is generated by ads and subscriptions.
NZME has long been a story of underperformance and mismanagement, with a steady decline in both revenue and profitability across its core Audio and Publishing segments since the mid-2010s. While the business enjoyed a temporary boost during 2021–2022, due to Covid tailwinds such as government subsidies and pandemic-related ad spend, those benefits have now fully rolled off. The core operations resumed its downward trajectory in 2023 and 2024, with free cash flow down by 67% from 2021 levels. While a large part of the secular revenue decline is a result of the print-to-digital transition in the newspaper business, a major drag on the company’s profitability has consistently been its bloated cost structure. Grenon has noted that restructuring of the expenses will be one of his main priorities in the turnaround:
NZME’s wage costs approach $150M a year, with 528 employees (of their approximately 1,200) earning greater than $100,000 and 93 earning greater than $200,000. […] At the top end, the CEO compensation is much too high relative to the size and complexity of the business, averaging over $2.25M per year for the past three years. […] Being a cost-effective producer is critical as new media alternatives continue to emerge, many of which, based on my personal experience, have a far lower cost structure, often with little employee turnover. We expect to find significant cost reduction in the high-cost employees and executive ranks. It is easy to understand why existing management has been resistant in this area.
Valuation Assumptions
Publishing: I’m using a 6x 2024 EBITDA multiple. There are no perfect listed peers focused solely on New Zealand or Australia. More or less the only somewhat local and recent reference point is Nine Entertainment’s acquisition of Fairfax Media in 2018. Fairfax was a major player in Australia’s newspaper market (owned “The Sydney Morning Herald” and “The Australian Financial Review”) and was acquired at around 16x 2018 EBITDA.
Among the US listed peers, The New York Times (NYT) and Gannett (GCI) currently trade at 16x and 7x TTM EBITDA, respectively. I’m not suggesting NZME deserves NYT or Fairfax-level multiples as those are much larger, more diversified companies. NYT, for example, generates 70% of its revenue from digital, compared to ~40% for NZME. GCI, on the other hand, generates 35% of the sales from digital. But given NZME’s market leading position in New Zealand, with a meaningful digital transition already underway, it’s hard to justify anything below 6x EBITDA multiple.
Audio: I am valuing the Audio business at 4x 2024 EBITDA. While again there are no easy comps in New Zealand, there are two similar-sized Australian peers: A1N and SXL, which are currently trading at 5x and 3.7x TTM EBITDA, respectively. It’s also worth noting that in 2023–2024, A1N made multiple takeover offers for SXL, with the final bid coming at 4x FY24 EBITDA.
OneRoof: I’m valuing OneRoofs digital part at 3x revenues and print magazines 1x. OneRoof’s main competitor Trade Me (the leading player in New Zealand’s real estate classifieds market) was taken private in 2019 at over 10x revenues. Australian peers trade significantly higher: REA (the largest player) trades at 17x TTM revenues, DHG (the second largest player) recently received a takeover bid at around 7x revenues. These businesses obviously deserve premium valuations—they’re larger, more diversified, and operate in much larger markets. Nevertheless, these reference points—together with OneRoof’s strong digital revenue growth in recent years (see chart below)—suggest that my estimates are likely to be on the conservative side. For context, even OnTheMarket (a smaller and slower-growing UK residential property classifieds peer) was acquired by CoStar in 2023 at 2.7x sales.
In his latest letter, Grenon hinted that OneRoof’s value could be “$0.50 per share or more”, which translates to around 5x digital sales and 1x print. I’ve incorporated this in my Bull Case scenario above, and to be honest, this doesn’t feel like a big stretch.
Why does this situation exist?
I don’t see any real obstacles to the board overhaul at the AGM. So it is probably a combination of two things: the market refusing to value the two businesses properly while in the current structure, and investors just being asleep at the wheel when it comes to the upcoming catalysts. There’s been almost zero chatter around this name, no real traction on fintwit, retail forums, or financial media outside of NZ.
Despite Grenon suggesting that OneRoof is more or less fairly valued and the real discount is in the media business, I think the truth is somewhere in the middle. Simply taking OneRoof’s valuation at his noted NZ$0.50/share puts the core media business at around 3x TTM EBITDA, which is just way too cheap. The business has issues: a slow digital transition, poor management, high costs, flat growth, etc. But it’s still a stable market leader with 40–50% share, real cash flow, and almost no debt. You can argue whether a business like that deserves a 5x multiple or 10x, depending on what outlook you take. But 3x is just too low, especially once the new management takes over.
So I’m not sure we can just take Grenon’s statement at face value, and I suspect there is also some uncertainty in the market regarding OneRoof’s standalone valuation. The spin-off will be a tiny NZ/AU listed company. More importantly, classifieds are winner-take-all markets, and New Zealand’s market is currently dominated by Trade Me. To its credit, OneRoof has made real progress over the past few years in closing the gap with Trade Me in both the online traffic and number of listings (see chart below). NZME’s management claims that this success to a large extent was driven by abilities to leverage NZME’s core media reach via print and radio:
However, in terms of revenue OneRoof is still 4 times smaller compared to Trade Me (NZ$27m vs NZ$107m). The leading player in classifieds has the ultimate pricing power. Nielsen data (see page 42) also ranks OneRoof at a third place in unprompted awareness, behind Trade Me and realestate.co.nz. It’s notoriously difficult to overtake dominant players in online classifieds (two sided network effects and etc), and so there’s a real risk OneRoof might never catch up.
That said, I think my 3x EV/revenue multiple isn’t pricing in any kind of market dominance. The leading player in NZ was taken private at 10x, Australia’s top platform is trading at 17x, and even DHG, the second-largest in Australia, recently got acquisition offers around 7x. New Zealand’s market is smaller and much younger, but the multiple difference that I’ve used in calculations seems to adequately reflect that, and doesn’t lean on any aggressive projections for OneRoof.
Finally, OneRoof only makes up about 18% of the total sum-of-the-parts equity value in my base case scenario. Any marginal haircuts in the valuation shouldn’t significantly impact the total outcome, assuming that I’m not completely off-base with the core business valuation. In the worst case, the downside looks protected well enough to wait and see.
In my humble opinion, the valuation of OneRoof looks too conversative. If OneRoof keeps on growing, even as number 2, it could easily generate a nice and clean Ebitda of 12 or more in 2026. With a modest multiple of 13 (I don’t think you can find anything in this space valued at just 13 times), this would be a 150m business. I have also seen more bullish analyst estimates (> 250mm). I don’t exclude that Grenon is open to increasing his stake and therefore does not want to talk up the stock too much. (Disclaimer: I am long).
I think valuation on an EBITDA basis is a bit tricky, given that the segment has just reached break-even and management has not provided segment-level EBITDA guidance. FWIW, Forsyth Barr expects the segment to generate c. NZ$7M in 2026E EBITDA (see the link below). That said, I fully agree that my OneRoof valuation might be conservative and that the segment could be worth substantially more.
https://www.forsythbarr.co.nz/assets/publications/NZM-2025-02-27-FY24-Result-No-Longer-Under-Oneroof.pdf
Maybe a very dumb question: what explained the sharp fall in OneRoof’s revenue after 2020? wind-up/sale of some legacy business?
I am not very optimistic about OneRoof’s viability as a stand-alone public company.
For one, it’s going to be too small.
But most importantly, I think, competitively, being a small stand-alone listed company will place OneRoof at a great disadvantage vs. Trade Me.
Trade Me as a private company doesn’t need to focus too much on achieving short-term EBITDA goals from quarter to quarter (and I don’t think it should, at this stage).
And its PE sponsor Apex can inject more equity if it believes that burning more cash now can lead to a more dominant position in the future.
As a stand-alone public company, OneRoof has an even less chance of beating Trade Me, than as a sub of a cash-flowing conglomerate.
Selling to a PE, like Trade Me did, is more viable and value-creating for shareholders, I believe.
There is also a technical issue: Most intl. brokers don’t provide access to NZX. Even if the spin-off OneRoof is dual-listed in ASX, the liquidity on ASX is likely to be almost zero for such a NZ small cap, and we will have a hard time cashing out the new stocks issued to us.
Regarding OneRoof’s revenues, the company used a different divisional reporting framework prior to 2021 – the segments used to be called Print, Radio, and Digital. Digital was digital revenues of all three currently reported segments (OneRoof, Publishing, and Audio). Previously, I lumped OneRoof and Digital revenues into one in the old table for years 2017-2020. Thanks for spotting. I’ve updated that now and asked Dt to upload the new table.
As for OneRoof’s viability as a standalone company, I’d agree it would likely be in a weaker competitive position if spun out as a separate public entity. Its small scale and lack of direct access to NZME’s cash flows and marketing reach would probably make things tougher. That said, as laid out in the write-up, I think the valuation I’ve used for OneRoof is conservative enough to reflect those risks.
NZM has just released a follow-up letter from Jim Grenon. Support from an additional 15% of equity holders whas been secured (on top of the previously indicated 47%). With support now “well in excess of 50% of the shares,” the board revamp looks like a done deal.
In the letter, Grenon also addressed certain statements made by NZM’s management in the media in response to the activist, including claims of allegedly strong historical performance, boasting about positive investment banking firm coverage (from the firm running the OneRoof strategic review), and concerns about NZM’s independence if Grenon takes control of the company.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02928882-2A1586875&v=7bc42bd11d853ed5e8c28f2ffcd6a069ee5cd6b4
So NZME’s board has delayed the AGM until the 3rd of June, saying that’s “appropriate” because of the recent nominations from Grenon and Osmium.
They’ve also fired back at Grenon with a longer response. Nothing really new though. They’re mainly saying that Grenon doesn’t have an actual plan and that he will take over editorial decisions despite only being a minority shareholder. One funny bit is how they’ve pointed to X (Twitter) as a warning about letting rich guys take control. It’s also funny they’re stressed about Grenon getting operational control as a “minority shareholder” when the current board barely owns any shares themselves.
One slightly concerning thing was that current board’s “value realization” ladder on page 14 of the response showed they might prioritize looking for M&A deals for OneRoof over monetization/spin-off.
Grenon basically shrugged off the AGM delay, saying it was expected and just proves the board’s run out of ideas.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02930524-2A1587765&v=7bc42bd11d853ed5e8c28f2ffcd6a069ee5cd6b4
https://businessdesk.co.nz/article/markets/nzme-showdown-delay-a-sign-the-company-is-out-of-ideas-jim-grenon-says
The New Zealand Takeovers Panel has launched an inquiry into whether Grenon cooperated with NZM’s other existing shareholders, most notably Spheria Asset Management (owns 19%), when accumulating his 10% stake in the company. As outlined in the document linked below (see sections 6 and 7), local takeover regulations require equity holders to either a make a full/partial acquisition offer or seek shareholder approval after crossing the 20% ownership threshold. As discussed in the Chapman Tripp article (see below), not complying with the rules might result in several penalties, including suspension of right to vote securities acquired in breach of the regulations for up to 21 days, restraining orders preventing an acquisition or even a forced sale of securities.
At this point, it’s unclear whether the investigation will lead to any penalties. That said, the market doesn’t seem overly concerned—reaction has been relatively mild, with NZM down 10% since April 3 compared to a 5% decline in the NZ50 index. Even if Grenon is suspended, many shareholders already back his proposals, so that alone likely wouldn’t be enough to save the current board at the upcoming AGM. I continue to view the setup as attractive.
https://www.legislation.govt.nz/regulation/public/2000/0210/latest/DLM10112.html
https://chapmantripp.com/trends-insights/the-takeovers-code-has-significant-implications-for-all-investors/
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02933458-2A1589328&v=7bc42bd11d853ed5e8c28f2ffcd6a069ee5cd6b4
The NZ Takeovers Panel has just released its decision regarding the investigation into Grenon’s stake acquisition. The panel concluded that, at the time of the acquisition of a 0.65% stake on March 4, Grenon was “not an associate of Spheria.” So, Grenon did not, together with associated parties, exceed the 20% ownership threshold and thus did not breach the Takeovers Act rules. While this was never a serious risk to the investment thesis, it’s a small positive.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02944030-2A1595075&v=7bc42bd11d853ed5e8c28f2ffcd6a069ee5cd6b4
https://www.takeovers.govt.nz/assets/Determinations/Takeovers-Panel-Determination-and-Statement-of-Reasons-7-May-2025.pdf
NZM has just announced that one of its directors, David Gibson, has resigned from the board “for personal reasons.” While the reason behind the resignation is unclear, there’s a chance he stepped down in anticipation of the current board members being replaced during the June 3 AGM. NZM shares currently trade at A$0.965/share, whereas my base-case SOTP value estimate stands at A$1.49/share.
NZM has recently provided an update on director nominations for the upcoming AGM, set for June 3, as the nomination window has now closed. In line with previous communications, Jim Grenon and Osmium Partners will nominate four and two directors, respectively, to the board.
More interestingly, NZM proposed alternative board director nominations after considering “the feedback from shareholders.” Management has initiated the nomination of “a high-profile former political figure” who, if elected, would replace the company’s current chairman.
I believe this will have little impact on the AGM results and the anticipated management revamp, given the previous support for Grenon’s proposals. NZM’s stock price has jumped 6% since the announcement and is currently trading at A$1.04/share, compared to my base-case SOTP value estimate of A$1.49/share.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02943474-2A1594619&v=7bc42bd11d853ed5e8c28f2ffcd6a069ee5cd6b4
It seems the nomination of said political figure came from the current chair’s husband. From the NZME press release:
“NZME has received correspondence from Stephen Donoghue-Cox nominating Mr Steven Joyce as a director. Mr Donoghue-Cox is a shareholder of NZME, holding 73,000 ordinary shares in NZME as at 5 May 2025. Mr Donoghue-Cox is an associate of Barbara Chapman, being her husband.
NZME Board’s alternative board composition proposal
NZME is aware of media speculation that Chairman Ms Chapman is stepping down from the NZME Board
and being replaced by Mr Joyce, a high-profile former political figure.
With the receipt of the nomination of Mr Joyce as a director, Ms Chapman has advised NZME that if Mr
Joyce is appointed as a director at the Annual Shareholders’ Meeting, Ms Chapman will resign as a
director and Chairman after a short transition, at which point the NZME Board is of the view that Mr
Joyce should then be appointed as Chairman.”
Osmium Partners has withdrawn its two director nominations. Hard to say what this means, but it might be that it has just decided to support Grenon’s nominees instead.
NZM has recently provided an interesting update on director nominations for the upcoming AGM, as Grenon seems to have reached an agreement with management. Key takeaways:
– The activist Grenon has withdrawn his three director nominations and his proposal to remove four of NZM’s existing directors.
– This leaves only Grenon and Mr. Joyce, the previously mentioned “high-profile former political figure,” as the sole director candidates. Both are “fully supported by the board,” and Grenon has agreed to support the appointment of Mr. Joyce as chairman.
– One of Grenon’s former board nominees will join OneRoof’s advisory board, and NZM will also establish an editorial board.
– After the AGM, NZM intends to appoint Mr. Pan, a technology and marketplace expert, to the company’s board.
Given how mismanaged NZM has been—as also pointed out by Grenon—I would have preferred to see a full board revamp. With most of the activist’s director nominees withdrawn, one of the potential catalysts (board overhaul) is now off the table. On the other hand, Grenon has previously made it clear that monetizing the crown jewel asset, OneRoof, will be a priority, while management has also publicly launched a strategic review of the segment. So I think there’s a solid chance Grenon has reached a reasonable agreement with NZM’s board to pursue business separation, possibly in the near term.
NZM has also announced it has entered into a memorandum of understanding with Gumtree Group “to explore the development” of a digital marketplace in New Zealand’s automotive market. Gumtree Group is a division of ASX-listed Gumtree Australia Markets, a classifieds business that operates several automotive marketplaces, including Gumtree Cars and Autotrader, but currently does not have a presence in New Zealand. As part of the partnership, NZM will leverage its New Zealand media platforms to sell Gumtree’s digital advertising inventory and will also feature Gumtree’s publications on its own. The parties expect to “potentially launch” the new venture following the evaluation stage.
NZM has recently announced the AGM results, with the previously nominated directors, including Jim Grenon, elected to the company’s board. The company also released the meeting presentation and an address from the current chairman, where management provided a trading update highlighting higher EBITDA through the first four months of 2025, driven partially by cost reduction initiatives despite a volatile macro environment. Management expects a recovery in the New Zealand real estate market “through this coming year.” During the address, management reiterated its willingness to pursue OneRoof value realization and noted that it expects to provide an update on the segment’s ongoing strategic review with NZM’s half-year results.
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02953122-2A1599783&v=04711220c3a57065317ba4efca4a3459a4e46882
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02953162-2A1599802&v=04711220c3a57065317ba4efca4a3459a4e46882
CFO has resigned and will leave the company by the end of December 2025. No reason for the resignation was provided. The company will now commence a search for a new CFO.
Osmium Partners reduced its stake from 6.6% to 5.6%. The activist sold shares over the past month at an average of A$1.05/share.
Some thoughts after H1 2025.
While revenues were down slightly vs. H1’24 due to the “difficult economic environment” and the exit of community newspapers, the company has made notable progress on the profitability front, driven by cost reductions, with EBITDA growing from NZ$21m to NZ$24m in H1’25. Management noted that the full impact of the cost reductions “will be seen in the second half,” with NZ$12m in annualized cost savings expected vs. NZ$2m recognized in Q2. As for the outlook, management noted that “economists remain optimistic there will be improvements in the year ahead.” The stock is up 8% since the announcement.
Somewhat disappointingly, management hinted that it will focus on growing OneRoof organically in the short term while “keeping strategic opportunities under strategic review” (see the quote from the conference call below). This is reinforced by the earlier appointment of a “technology and marketplace expert” to the company’s board. So, it seems the only remaining near-term catalyst here is out of the cards. On a positive note, OneRoof’s solid operational performance continued, with growth across multiple metrics such as new residential listings and the residential listings upgrade percentage compared to H1’24.
“I think there’s a couple of things. Firstly, you will have seen that the OneRoof Advisory Board has been formalized with Bowen Pan taking the Chair role of that. That reports directly to the Board and will continue to give great guidance and support to management of the OneRoof team. I think secondly, the review identified there just a significant opportunity with the current product and in the market overall. And so the Board is very focused on ensuring that we continue to offer a better experience in the product, grow revenues quicker and deliver shareholder value organically, but we’ll obviously keep its eyes open to other opportunities as they present themselves.”
NZM remains cheap, trading at 4.3x FY25E EBITDA, which I think is too low for a stable, profitable, and market-leading business. The special sit angle is kind of gone in the near-term, but I continue to think NZM is attractive.