Investors think Nine may be overpriced

The chances of Nine Entertainment's float succeeding have been boosted after several well-known fund managers backed the decision by a shareholder to retain its stake for up to a year.

But potential investors in the television, digital and events group have raised concerns the float could be overpriced.

Nine chief executive David Gyngell and chief operating officer Simon Kelly are set to embark on their second international roadshow before the bookbuild begins at the end of the month.

The pair will leave Sydney on November 5 for a three-week trip that starts in Asia with Singapore and Hong Kong, before moving to financial centres in the US, Canada and Britain.

The Australian revealed yesterday that major shareholder and US hedge fund Apollo Global Management will hold on to its entire 28 per cent stake until at least the second half of next year.

Principal of Alphinity Investment Management Bruce Smith said the market was still spooked by retail group Myer's 2009 float, when the share price plunged on the first day of trading.

"My own view is that it's better to have people in there for a while because it reduces the risk of a Myer-type outcome where the vendor exits immediately," Mr Smith said.

"That's my clear preference. It means the company is likely to be a little bit less aggressive on the price and will be more concerned about the longer-term prospects for the company."

Wilson Asset Management chairman Geoff Wilson said he was almost certain to buy Nine shares. "Apollo has access to the inner workings of the company. From my perspective it's a very positive sign," Mr Wilson said.

A sales facility for original investors was launched yesterday and will be open for the next three days. US hedge fund Oaktree Capital, which owns 26 per cent of Nine, will offload about 20 per cent of its shareholding when Nine lists on the Australian Securities Exchange on or just after December 9.

But Sirius Fund Management managing director Kieran Kelly questioned the commitment of the 70 shareholders occupying the remainder of Nine's register.

"While the major shareholders might be locked in on day one, there are too many that might not be. I would be querying the performance of this stock in the early days," he said.

Well-placed sources believe Nine may list at about $2.15 a share with an earnings-multiple valuation of about 8.5 times. Nine will be priced on a higher multiple than its closest peer, Seven West Media.

"If I'm a buyer, I want to see the discount," Mr Kelly said. "I don't care that it's trading at a premium to Seven. Show me where the growth will come from in an increasingly fragmenting market."