Bank: “Positive opportunities in broadcast advertising”

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A comprehensive study of European commercial broadcasters by analysts at Deutsche Band advises clients that traditional media formats including TV and print have come under significant structural pressure over the past few years as consumers have moved online and advertisers have followed suit.

The bank says that, despite the doom and gloom, TV has actually fared better than print.

“We think the structural pressures caused by the influx of SVoD services such as Netflix and Amazon Prime have been priced in [as far as share prices are concerned), particularly following the de-rating of the sector in 2020, and see some attractive entry points in the European broadcasters we cover, notably ProSieben and ITV. In this report, we dive into recent trends, valuation evolution, and our thoughts on the individual broadcasters,” says the bank

Then there’s Covid. The bank says: “With Covid-19 and the corresponding decline in advertising spend, broadcasters have been one of the more significantly hit advertising mediums with declines in spending on TV in the big 5 European markets likely to be in the range of 17 per cent in 2020 (Estimated) vs. Print at -24 per cent and Out-of-home/Cinema at -30 per cent (GroupM forecasts). We correspondingly see revenue declines of 36 per cent on average for our European Broadcasters in Q2 and 15 per cent in 2020 estimated, before we model for a recovery in 2021 estimated of 11 per cent (vs. the industry growth estimate of 12 per cent by GroupM). We acknowledge that visibility is still murky and this could partially explain why the share prices on average are down 44 per cent year-to-date. However, we think the de-rating presents some interesting opportunities to enter the [broadcasting] space.”

In its ratings and advice summary, Deutsche Bank upgrades Pro7/Sat1 to a “Buy”. The bank says: “We think there are positive catalysts ahead in the form of a potential value crystallising of its match-making business. Pro7 is also an interesting candidate in the sector consolidation story.”

“We think ITV has de-rated too sharply given its potential to bounce back in terms of growth and think at 7.4x P/E 21E the stock presents an interesting entry point; ‘Buy’.

“We think M6 and Mediaset Spain have de-rated far too sharply vs. the likely earnings declines this year and move to ‘Hold’ from ‘Sell’,” advises the bank. “We maintain ‘Hold’ on Mediaset and RTL on balanced risk-reward.”


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