Advanced Television

Stand by for cash return at RTL

June 11, 2013

ITV, the UK’s leading commercial network, is riding high, helped by an upbeat report from a leading analyst. The situation might be even better in Luxembourg, home to RTL.

RTL is Europe’s largest commercial broadcaster and owns the Number 1 networks in Germany, the Netherlands, Belgium, Hungary and Luxembourg. But the past few years have not been the easiest as Europe has suffered during the economic downturn. A new report from investment bankers Morgan Stanley suggests that “RTL has demonstrated strong execution by managing to grow the audience, market share and margin of its main TV operations even as multichannel penetration was fragmenting audiences. Since 2008, its market share has grown +4.1 per cent to 37 per cent.”

With RTL consistently delivering ‘best in class’ margins and free-cash-flow generation, the bank’s report says there is now “significant cash return potential” for investors n RTL, and has initiated coverage of the company with an “overweight” rating.

The bank’s note states that RTL’s stock price is trading at around a 15 per cent discount to its peer group (Pro7 and ITV) and anticipates a special dividend around August. The bank says it sees “RTL as the best cash return story in Media.”

However, with 65 per cent of RTL’s profits coming from European free-to-air activity the bank warns that a prolonged weakness in Europe’s macro situation “could affect profits”.

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