1. UK Media Sector Landscape

The UK media and entertainment industry is diverse and dynamic in nature and encompasses creative content including music, TV, film, news, magazines, books, gaming, social media, and advertising. These are delivered to the audiences and customers through platforms and distribution networks such as TV networks, cinema distributors, B2B data exchanges and music publishers. Few of the well-known names in the media sector include British Broadcasting Company, ITV Network Limited, Sky Limited, etc.

The UK is known as an early and heavy adopter of digital solutions and this reputation has enabled it to take consumer spending on over-the-top video streaming, thereby outpacing global growth. Digital advertising has also benefitted from the nation’s high level of digital maturity, coupled with increased traction in the space during COVID-19 as consumers moved quickly to online platforms for content, commerce, entertainment, and games.

Key Trends in the Media Sector

Risk Exposures to Media Sector 

• Content Risk: Content creation is a highly innovative business that needs to capture new audiences through investment in new creative concepts, which may have no guarantee of success.   
• Risk of Fraud: Increase in the volume of inventory, threat of ad-blocking and the perception of fraud risk in the sector might contribute to the decline of value of digital ad space.
• Business Risk: The structure of media business is complex in nature and firms have to tread cautiously while trying to find the right mix of legacy, mixed media and online-only working models.

SWOT Analysis

Media Sector Outlook

There are favorable tailwinds in the sector and a more in-depth look at the future of the Media industry reveals that virtual reality, cinema, and data consumption are expected to see the highest growth rates among all the media segments in the next few years. The pandemic has accelerated changes in consumer behavior and there is an increasing shift witnessed in the Media space. Some of the key changes observed are box office revenues shifting to streaming platforms, rising eCommerce helping to boost digital advertising, creators of user-generated content tapping into new audiences, or brands looking to find potential customers across new entertainment platforms and games.

2. Investment analysis and stocks under discussion (DATA and RCH)

After gaining insights into the Media sector, we would look at the business model of two players listed on the London Stock Exchange.

A. GlobalData PLC (LON: DATA)

(Recommendation: Speculative Buy, Potential Upside: 19.31%, Market Capitalization: GBP 1.36 billion)

GlobalData PLC (LON: DATA) is an FTSE AIM 100 listed company that provides market data intelligence services. It has been serving over 4,000 clients, including Companies across various industries.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the stock is trading close to the lower Bollinger band with a low 14-day RSI level at ~13.27.  

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 19.31% over the current price of GBX 1,131.00 (as on 08 June 2022, at 10:05 AM GMT+1).

B. Reach PLC (LON: RCH)

(Recommendation: Speculative Buy, Potential Upside: 15.25%, Market Capitalization: GBP 373.52 million)

Reach PLC (LON: RCH) is an FTSE All-Share listed news publisher in the UK. It reaches around 48 million people a month through online and print brands.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the stock is hovering near to its lower Bollinger band with low 14-day RSI level of ~34.39, reflecting underbought stance.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 15.25% over the current price of GBX 117.84 (as on 08 June 2022, at 10:15 AM GMT+1).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.  

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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