This week, investment bank Exane/BNPP is holding a series of presentations with Spanish industry players, and in a note to clients says that it is now cautiously optimistic on the state of Spanish commercial broadcasters, which it now favours over Italian TV.
The bank says: “We like the Spanish TV names and expect them to trade at a premium to Italian TV to reflect a take-out premium. The Spanish and Italian TV names are generating c.90 per cent of their revenues from the core TV business. This compares to the Northern European TV names for which TV advertising only makes up c.50 per cent of revenues. It suggests that any economic slowdown could put Spanish and Italian players at much more risk of further downside.”
“However, in our view the Spanish TV stocks are also the most likely take-out targets in the European TV space, reflected in their premium valuation over Mediaset. Mediaset owns 52 per cent of Mediaset Espana and 42 per cent of Atresmedia is held by Planeta de Agostini and 19 per cent by RTL. This suggests that if private equity wants to get involved it would only have to bid for the floating part. Atresmedia and Mediaset Espana also have strong balance sheets with the latter being net cash positive.”
The bank reports that there has been no change in trends amongst the commercial players but that “better cost management” is now in place. “The Spanish TV companies have guided for TV ad market to be down c.1 per cent in Q4’18. Our latest market checks suggest Q4 (particularly October & November) might have been a bit better than expected and should close at 0 per cent for the Spanish TV ad market,” adds Exane.
As with commercial TV elsewhere viewing is under pressure. Exane notes that the top-line of the Spanish TV names is driven by Gross Rating Points (GRPs) which are a combination of TV viewing time, audience share, inventory and prices. “Inventories have been full for a number of quarters now. With audience shares remaining roughly stable and viewing times decelerating more swiftly since H2’18, pricing remains the key growth driver.”
“Pricing failed to rise in 2018. To remedy this trend, Atresmedia is adopting a new commercial policy in 2019, which consists of reducing the number of ad minutes per hour and therefore raising the pricing. Mediaset Espana adopted a similar strategy a couple of years ago. Given that both companies hold such a large share of the TV ad market, both adopting the same strategy could potentially help pricing.”