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BSkyB still a News Corp target

BSkyB will report Q2 results before the UK stock market opens on January 31st. But on January 28th its share-price hit a 52-week ‘high’ (at 804.5p) helped by some very positive sentiment from investment bankers Morgan Stanley.  The bank says there’s plenty of headroom for growth, and suggests that even as high as 827p per share Sky would be trading at a 20 per cent discount to its cable rivals (“whom it increasingly resembles”).

Highlight from the report is that the bank says it cannot rule out a fresh bid for BSkyB from News Corp. The bank says that BSkyB and News Corp were last year declared “fit and proper” despite the tarnished problems surround Rupert Murdoch’s News of the World ‘hacking’ problems. “Media plurality issues had a solution last time around (the divestment of SkyNews) and the split of News helps (the BSkyB stake will be held in the new Fox Group). News last bid 700p per share but was widely expected to raise its offer to 800p before the bid was blocked. We feel that a bid by News for Sky might still be politically inexpedient in 2013 but by 2014 might yet become an acceptable proposition again.”

In an 8-page report to clients the bank says it expects plenty of positive news to emerge on Thursday morning with strong revenues for the quarter-year to December 31st (up 4.2 per cent), EBITA up 6 per cent and earnings-per-share up 11 per cent.

However, there are some trading concerns. The bank recognises that Sky’s natural core pay-TV growth has slowed with net additions now hovering around the c100,000 rate per annum, with the pre-Christmas period contributing about 30,000 net new additions. “BSkyB is operating in a tough consumer environment and is beefing up its content and services ahead of new competition,” says the report, citing challenges from the OTT sector as well as wealthy new players such as BT and Talk Talk.

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