Investment bankers Morgan Stanley, in a note to clients, says that broadcaster CTC Media has plenty of upside potential should the Russian advertising economy improve, or if its own ratings improve. Morgan Stanley advises investors to stay “Equal Weight” as far as shareholdings are concerned.
However, the bank admits that 2012 has been a “lacklustre” year for CTC Media. The broadcaster has an 18 per cent share of the Russian TV, and an impressive 55 per cent share of advertising. But the bank forecasts that these figures are under threat. “CTC’s major issue is that its core channel (75 per cent group shares) has lost considerable audience share in recent years. Management is addressing this by significantly increasing cash funding and lowering dividend payout to an expected $80 million in 2012. The success of this strategy will materially determine whether CTC out or underperforms the market. Every 1 per cent share of audience is worth over 15 per cent of 2012 EBITDA. Another uncertainty is the pace, take-up and funding of the shift to digital distribution – we initially factor in $25 million extra operating expenses by 2016,” says Morgan Stanley.
As far as CTC’s core channels are concerned, the bank says:
CTC Network’s performance is soft (core channel is down 24 per cent from 2009 to 6.8 per cent 2012). However, the Top 5 channels have also lost 17 per cent share in the period with fragmentation accelerating in 2012. In 1H12 TV advertising grew +8 per cent but, within this, the small channels were up 42 per cent).
While CTC’s smaller channels Domashny and Peretz have performed well and diluted the share loss, they only account for 17 per cent of group EBITDA.