Citi sees broadcaster's short-term weakness as attractive entry point

Banijay NV

04/10/2022 13:00

** Citi sees the European broadcasting stocks as oversold
and expects advertising to decelerate rather than experience a
steep decline
    ** Although it expects a tough Q3 ahead of the sector it
thinks the 12-month outlook is positive 
    ** "We would use significant weakness as an attractive
opportunity to buy/add to positions," it says
    ** Citi forecasts ad declines of 5% for TV advertising in
2023 and hence reduce EPS estimates by 10%
    ** Despite the cut, it sees "compelling value" in its
"buy"-rated top-picks Viaplay  VPLAYb.ST , ITV  ITV.L ,
Prosiebensat 1 Media  PSMGn.DE , RTL  AUDK.LU 
    ** From a micro level the proportion of the companies'
revenues that are derived from advertising is coming down, now
only constituting 55% of sector average revenues, Citi points
out
    ** Still, it sees Q3 as a negative catalyst for Viaplay,
ITV, Prosiebensat 1 Media and Television Francaise 1
    ** On Viaplay, Citi fears the company's Capital Markets Day
due on Nov. 9 might bring recalibration to the group's
medium-term guidance 
    ** Despite being "fairly comfortable" on Q3 financials for
ITV and Prosiebensat 1 Media, the broker sees risk of 2023
downgrades 
    ** For Television Francaise 1  TFFP.PA  Citi is more
concerned about disappointment on the Q3 results themselves,
seeing a sharp deterioration of advertising in the quarter  
    ** By contrast, it sees Q3 as a positive catalyst for
MediaForEurope  MFEB.MI  and FL Entertainment  FLE.AS , seeing
scope for positive surprise for the former and comfort on key
performance indicators for the latter
 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))