Broker snap: Credit Suisse bullish on ITV ahead of results

24th Feb 2012 15:30

Shares in terrestrial broadcaster ITV were making gains on Friday afternoon ahead of the group's full-year results next Wednesday.Credit Suisse has today reiterated its outperform rating on ITV saying that the stock is still "modestly valued" - trading at 10 times 2012 earnings (compared with peers trading at a multiple of between 9.8 and 12.9) - despite the 32% rally in the share price over the last three months (versus the FTSE All-Share index which is up 16%)."Given ITV's structural advantage of being a vertically integrated producer/broadcaster, we think the stock deserves a higher rating," the broker said, adding that at its target price of 90p, the stock would then be trading in line with the sector (at a price-to-earnings [P/E] ratio of 11.9).The broker says that management's turnaround plan is starting to bear fruit "with positive momentum building in ITV Studios, Broadcasting and Online". Meanwhile, new online aggregators such as Netflix and Lovefilm could, in the longer term, offer opportunities to monetise ITV's TV content, something that is not yet factored in to Credit Suisse's forecasts.With a net cash balance sheet, it also foresees ITV 'reweighting' its business mix in favour of TV production through M&A, and if not, there is still "scope to enhance earnings with a share buy-back".Meanwhile, current earnings are being held back by £25m a year (around 6%) due to the group's 'Transformation Plan'. Without this, the 2012 P/E would fall from the 10x to 9.6x.The stock was up 3.21% at 80.3p by 15:45.BC