Outlook improving for ProSiebenSat.1

The prospects for German-based broadcast group ProSiebenSat.1 are looking up for 2010, according to analysts. After a tough 2009 in which advertising revenue has suffered the effects of the economic downturn, management have told analysts that they will be able to raise prices for their ad inventory in 2010 in Germany and the Netherlands.

Investment bank Morgan Stanley said that the best-case scenario will see a cyclical recovery take net earnings back to peak level by 2011 with profit margins to hit 28% in the longer term. A more conservative ‘base case’ envisages revenues back to peak levels by 2013 and a 26% long term profit margin. The bank issued its forecasts in the wake of robust third quarter results from the broadcaster. It reported ad revenue declines of 2% in the quarter compared with a reverse of 6.4% in the first half of the year. Ad revenues are expected to move into positive territory in early 2010.

Morgan Stanley added that ProSieben shares are trading at a 32% discount to those of its peers and the current share price fails to factor in future cash flow, debt repayment and a predicted upturn.

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