BSkyB shares are continuing their gradual recovery after plunging in the wake of News Corporation withdrawing its contentious bid for the satellite broadcaster.
As the fallout from the News of the World phone hacking grows - with Rebekah Brooks finally quitting as News International chief executive - BSkyB added another 13p to 709p.
The main reason for the rise seems to be a buy note from Deutsche Bank, which has resumed coverage now the company is no longer in an offer period (for the next six months at least). Deutche has put an 850p target on the company's shares, saying the 18% fall over the past week during the media firestorm represents a good buying opportunity. Deutsche said:
The perennial fear on BSkyB has been a major new investment phase pushing out earnings and cash returns. The News Corp bid has indicated that no such investment is likely to be forthcoming near term. Furthermore, pay-TV's defensive credentials and the macro environment certainly seem no worse than 12 months ago.
The bank also believes BSkyB can afford to increase debt and return cash to shareholders, up to perhaps 113p a share. As for what happens next, Deutsche said:
We assume there is no prospect of any early resumption of a bid from NewsCorp, bearing in mind the likely length of UK media inquiries. But we also assume that NewsCorp is not likely to be a seller of its stake. We therefore expect the stock to revert to fundamentals, although the likely transition of shareholder register and exit of event/merger arbitrage funds looks likely to cause further volatility.
