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Broadcaster ITV spotlighted in bullish Goldman Sachs media note

Published: 10:09 13 Jan 2017 GMT

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In early morning trading, ITV shares were up 2.5%, or 5.2p at 208.2p

Commercial broadcaster ITV PLC (LON:ITV) was a top FTSE 100 gainer today as Goldman Sachs upped its stance on the group in a bullish note on the European media sector.

In early morning trading, ITV shares were up 2.5%, or 5.2p at 208.2p.

Analysts at the US banking firm raised ITV to its ‘Conviction Buy’ list, highlighting the firm's "content exposure, upside to consensus ad forecasts, M&A potential and low valuation.”

In the sector note to clients, the Goldman’s analysts said: “We believe the recent pick-up in M&A activity could continue in 2017, given the rising importance of content and scale in distribution”.

In the UK, they said they saw ITV and FTSE 250-listed exhibitions and media group UBM PLC as the most likely sector bid targets

However, despite this, the analysts still downgraded their rating for UBM to “neutral” from “buy”, citing valuation grounds.

But UBM shares still added 1.1%, or 8p at 735p with the M&A target tag.

Elsewhere among UK media stocks, mid cap events and business-to-business publisher Ascential PLC (LON:ASCL) was also added to the Goldman Sachs “Conviction Buy” list, sending its shares 3% higher, up 8.5p to 290.4p.

But Goldman removed FTSE 100-listed business information firm Informa PLC (LON:INF) from that key Conviction list, cutting its stance to "buy". Informa shares, however, were flat at 691.5p.

Sector bulls …

The bank – known as the Vampire Squid – also upped its sector coverage view to “attractive” from “neutral.”

Goldman’s analysts noted: “Media stocks underperformed the broader market in 2016 for the first time since 2009, as growth disappointed and structural concerns heightened.”

They pointed out that the European sector now trades on 16.4 times 12 month price/earnings, a 7% premium versus the market historical average premium of 13 times.

However, the analysts added: “We believe this does not price in the broad pick-up in growth, and creates compelling opportunities, given our expectations of 17%/9% EPS growth in 2017/18 vs. +12%/5% for the market, with attractive yields and FX tailwinds.” 

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