EUR 200.00 For Business Accounts Only

MEDIASET ESPAÑA: VIRTUAL MEETING WITH INVESTORS (ANÁLISIS BANCO SABADELL)

Highlights from the Virtual Meeting of the CFO of Mediaset España (Javier Uría) with Investors:
 Advertising market: Performance in the months of October/November remained flat vs. 2019, vs. Infoadex’ data of a -3.6% drop in October and our estimate of -15.4% for 4’20. The company claims that announcers have recognised the high value of TV advertising, realising that they cannot stay out of it for long, which is positive. It has given no indications for 2021 (as usual), given that there is a high level of uncertainty and volatility; we expect the market to grow by +3% (and +8% i2p).
 Merger with Mediaset Italia: The MFE merger did not move forward for technical reasons (lawsuit with Vivendi), but the essence of the agremeent remains the same. The company believes that pan-European mergers (or similar) are fundamental to gain scale and volume (mainly) in the segment of digital advertising, a “need” that has increased with the pandemic. It also points out that the merger may generate synergies (€ 120 M of synergies were announced previously). No indications have been given on when this agreement will be anounced.
 €~38 M sanction from the CNMC: The company is persuaded that it will win the appeal, which is why it challenged the sanction. It has presented a guarantee (with a low financial cost), and thus, it will have no impact on the balance sheet/cash levels. Separately, the company has adapted its commercial policy to comply with the CNMC’s indications (with no impact on the P&L statement).
 M&A: The company is studying several options that would be in line with recent deals (El Desmarque and Be a Lion): these options will not represent a substantial investment and will provide good margins. The objective of the acquisitions will be to find complementarity and to increase the number of individual users to increase the value of the platform.
 Third-party content sales. The company has been developing this business line for a few years, but has reinforced it in 2020. The company considers that producing content is an additional way to monetize its productions, by creating opportunity windows or increasing their duration.
 Costs: The company’s objective is to maintain its flexibility (as they have proven), and for this reason “avoids certain long-term agreements for the acquisition of expensive content that do not favour this flexibility (depending on the market conditions).
MARKET IMPACT
These messages are consistent with the company’s strategy and reinforce our view: diversification and cost-control measures offset the structural weakness of consumption/audience shares and the migration into the online channel, and the level of valuation is appealing, with a FCF’21e of >15%. Moreover, the better performance of the advertising market yields additional upside.