With estimates that the Rugby World Cup could add nearly £1bn to UK GDP (courtesy Ernst & Young) one of the business beneficiaries should be ITV.
For a change a major sporting event is live on a free to air broadcaster rather than available only to satellite or cable viewers. This has prompted analyst Alex DeGroote at Peel Hunt to repeat buy recommendations on the main terrestrial broadcasters. He said:
ITV has exclusive rights to the Rugby World Cup, which starts today. This is important for an improved share of viewing for the ITV family in the second half of 2015. It is also important for third and fourth quarter advert performance across the ITV network.
A good showing by the home nations could drive a healthy ‘late spot’ market. Overall, we remain very positive on the outlook for free to air broadcasters in the UK (earnings per share momentum; regulation; consolidation; retransmission fees).
He adds:
Live sport is increasingly ‘appointment viewing’, particularly when the top games are on at domestic peak time. Unusually, in this day and age, the Rugby World Cup is also on free to air terrestrial TV. One of ITV plc’s main issues has been a decline in SOV (share of viewing) year to date, and this could be remedied in part with good audiences through the World Cup.
Rugby appeals to a key demographic (affluent male, etc). Hence we would expect all the big brewers, gaming companies and autos to be visible in coming weeks. A healthy spot market should also ensue if England, in particular, makes it to the latter stages.
For the broadcasting sector, one issue will be the fate of UTV Media, 172.25p, which trying to sell its television interests, with ITV said to be the leading contender to buy them. UTV also owns TalkSport as well as the ITV franchise in Northern Ireland and a new channel, UTV Ireland, which has made an unsuccessful start to life in terms of audience numbers and advertising. De Groote said:
ITV is in effect a ‘white knight’ rescuing UTV Media after the calamitous downgrades from UTV Ireland, the new commercial channel. We downgrade our UTV target price to 195p (from 250p) in line with our break-up thesis, which (unfortunately) ascribes zero value to the new channel.
ITV is currently flat at 246.7p in a falling market while Scottish broadcaster STV, which could also ultimately be in ITV’s sights, is down 6.75p at 442.5p.
