Broker snap: Panmure expects strong start to 2013 for ITV

21st Dec 2012 10:03

Panmure Gordon has said it foresees 'material upside' for terrestrial broadcaster ITV in the New Year, as it reiterated its 'buy' rating and 140p target price for the stock.The broker is anticipating a "very strong start" to the new financial year in terms of advertising growth.Analyst Alex DeGroote said: "Group M - owned by WPP, and a scale buyer of media airtime - is suggesting ITV will benefit from Jan/Feb ad growth of c4% YOY, which is a very positive development. Our own FY 2013 ad growth expectation is 2%, but bears in the market may be modelling negative growth."DeGroote said that, given that adverts comprise around 75% of ITV's group revenue, the impact of operating gearing here from better ad growth could be "very powerful in terms of ITV [earnings per share] momentum". He said that over 80% of incremental ad revenue will convert to profit.While there is still some uncertainty regarding a Premier League contract, the broker remains a buyer of the stock."We are well-known supporters of ITV, and have been gratified by the very strong share price performance this year (over 50% share price, excluding dividend). Our FY 2012-14 forecasts feel increasingly unambitious," DeGroote said.Shares were down 1.08% on Friday morning, but are still up 3.53% over the past week.BC