Newspaper article The Evening Standard (London, England)

UBS Sees a Dark Picture at ITV and Downgrades

Newspaper article The Evening Standard (London, England)

UBS Sees a Dark Picture at ITV and Downgrades

Article excerpt


SHARES in struggling television broadcaster ITV, steady at 39p, were trading just a whisker above their record low of 38.3p today, but if one of the City's big hitters is correct, they still have some way to fall.

UBS has repeated its sell rating on ITV and lowered its 12-month price target yet again from 28p to 25p, claiming the shares are trading at 40% premium to those of rivals.

The broker points out ITV's reliance on a rapidly declining UK economy and its impact on advertising revenues.

"Stripping out the content business, the remainder is trading on 56 times 2009 earnings, more than pricing in an uncertain recovery and regulatory benefits. While ITV is one of the most geared stocks in the market, both operationally and to the economy, it has been supported by bid hopes. In our view, bid hopes are misplaced until the share price catches up with the economic reality." The broker warns that the decline in advertising revenue is set to grow from 8.9% to 13.1% next year. This can be offset, to a certain extent, by cost savings, but ITV remains constricted in this area by fixed sport costs and increased competition.

Other brokers have also pointed out that while BSkyB, up 5p at 413?p, has been instructed to reduce its stake in ITV from almost 18% to less than 7%, those shares may overhang the market for some time to come.

Meanwhile, there are only so many times that a dead cat can bounce, but even so investors were making the most of the situation today as they set about clawing back, or taking advantage of yesterday's stock market collapse. Last night Wall Street managed to close above its worst levels of the session as did Tokyo this morning.

The miners managed to glean comfort from a cut in Australian interest rates and the subsequent risen in the value of the Australian dollar. But the early gains in London were tentative and, as with yesterday's sharp falls, they were only backed by modest levels of turnover accompanying the rally. …

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