Broker snap: ITV to benefit from UK ad upswing, says Morgan Stanley

20th Aug 2013 09:56

Morgan Stanley has raised its target price for terrestrial broadcaster ITV from 175p to 185p, highlighting the potential for an upswing in UK advertising.The bank also reiterated its 'overweight' position on the group despite this stock's impressive performance so far this year which has seen shares rise 52%.Morgan Stanley has raised its earnings per share (EPS) forecasts for 2013-2014 by around 3-4% per annum due to higher expectations for sponsorship revenues and the SDN business in Broadcast, combined with lower costs. The upgrade also reflects increased estimates for Studios based on the bigger-than-expected EBITA contribution from recent acquisitions.The bank's estimates indicate EPS growth of 22% in 2013, 9.0% in 2014 and 12% in 2015.The research report said: "Advertising momentum will be the key driver of the short-term share price. 2013 appears to be in good shape and the market is optimistic that 2014 will see an improving UK environment."The bank highlighted comments by ITV Chief Executive Adam Crozier who showed that management is more upbeat about the underlying trend in UK advertising. He said "fear of the downside has largely diluted now" and the ad outlook is "more positive than it has been over the last three to four years".At the new 185p target price, Morgan Stanley said that stock would trade at a 2013 enterprise value-to-EBITDA multiple of 10.8, a slight premium to its average 10x multiple over 2007-2012.ITV was trading 0.19% higher at 159.3p on Tuesday morning.BC