ProSiebenSat.1 ‘undervalued’ despite profit warning

ProSiebenSat.1German broadcaster ProSiebenSat.1 remains undervalued and current investor concerns are overstated, despite the company issuing its third profit warning this year, according to analysts at Berenberg.

ProSiebenSat.1’s share price fell on the profit warning, when the media group’s management said that it expected content and sales activities to record a double-digit percentage decrease in revenues in Q4 compared to the previous year’s period, due to strong comparable figures and the shift of some productions to next year. ProSiebenSat.1s said it expects both adjusted EBITDA and adjusted net income to be below their respective previous year’s figure in the fourth quarter.

According to Berenberg, however, ProSiebenSat.1 will benefit from the introduction of addressable advertising, while broadcasting will continue to provide cash to fund the acquisition of growth assets.

“While TV is hardly booming, and the write-off is unhelpful, we see upside from addressable TV, which ITV is now trialling, the German economy is robust, and cost control is good. We see broadcasting as the cash cow that funds the acquisition of growth assets. This is much the same as the Axel Springer strategy. With less than 50% of group revenues coming from TV advertising, we think the current portfolio can sustain mid-single-digit organic growth, with margins flat to slightly up, driving mid-to-high single-digit EPS growth,” the analysts said.

Berenberg’s analysts cut their price target for the group but nevertheless put a buy recommendation of ProSiebenSat.1’s stock. They said that the downgrade was “not about advertising”, which had recovered in the fourth quarter, but about congtent sales phasing, which will hit revenue this year.