Advanced Television

“Double upgrade” for ProSiebenSat.1

April 29, 2020

Generally there’s been nothing but doom and gloom for Europe’s commercial TV broadcasters, but investment bank Exane/BNPP has issued a “double upgrade” on Germany’s ProSiebenSat.1 to “Outperform”.

The bank says that last week’s announcement from ProSiebenSat 1 of a 40 per cent decline in TV ad-revenue for April the broadcaster’s shares “barely budged”. The bank’s report adds: “But while the bad news seems priced in, the good news is still waiting for an audience. With strong growth at the Commerce business (+15 per cent in Q1), encouraging viewing trends on its VoD platforms, a new management’s strategy, and upside risk from M&A, we double upgrade to ‘Outperform’.”

The bank says that with social restrictions easing in Germany, ProSiebenSat.1 should benefit more than most.

It adds: “[ProSiebenSat.1’s] commerce business is hitting its stride. Nucom (c40 percent of Enterprise Value) means c20 percent of group revenues have been diversified beyond TV ads/production, making Pro7 a highly Covid-19 resilient TV stock. Further out, we expect the new management’s honing of strategic focus to lead to a sale, which would allay liquidity concerns.”

Moreover, Germany’s OTT platform contender Joyn+ (backed by ProSiebenSat.1 and Discovery) is capturing viewer attention. “Our analysis of the data indicates viewers have embarked on a content discovery journey, in effect dropping sports and hunting out and buying entertainment. For the time being, we attribute zero value to Joyn+, but expect it to build sticky subscription revenues from these new viewers,” states Exane/BNPP.

The bottom line for the bank is a double upgrade for the broadcaster, and a Target price raised from €4.8 to €12.  However, the bank adds: “Competitive dynamics and structural pressure in broadcasting should persist. Our upgrade is largely driven by Nucom. With shares down c80 per cent since peak / c40 per cent YTD, and given M&A upside risk, we view the risk/reward as attractive. We raise our EV by c35 per cent, which, given the weight of the debt, translates into a 150 per cent TP increase. Despite the shares having gained c20 per cent in the last two days we believe there’s more to go for.”

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