ITV PLC

ITV PLC (ITV) is a London, United Kingdom-headquartered integrated producer broadcaster (IPB). The group creates, owns and distributes high-quality content on multiple platforms globally, and owns 13 of the regional licenses and sells advertising on behalf of all licences, making it the largest family of commercial channels in the UK. The company's operations are differentiated in two segments: Broadcast & Online and ITV Studios.

Trading Update
The group reported that total external revenue fell by 4% in the first quarter to £743 million, while like-for-like revenue dropped by 4% to £874 million. Total advertising revenue also decreased by 7% to £417 million, while non-advertising revenue was down by 1% to £457 million. The group informed that demand for advertising is getting impacted by the continued economic and political uncertainty, because of which the company expects total advertising to be down 6% over the first half. 

Financial Highlights (FY2018, £ million)

(Source: Annual Report, Company Website)

Total ITV’s revenue was up by 3% to £3,766 million, against £3,655 million in 2017, with a rise of 3% reported in external revenue at £3,211 million. Adjusted EBITA, driven by the closure of Encore and investment in the schedule for the World Cup, decreased by 4% to £810 million. The EBITA margin also declined by two percentage points to 25% as compared to the last year data. The statutory profit before tax reported a rise of 13% to £567 million. The diluted adjusted EPS dropped by 4% to 15.4 pence, though the weighted average diluted number of shares declined year-on-year. The statutory EPS grew by 15% to 11.7 pence, reflecting a decline in the reduction in exceptional items and net financing costs.

Dividend
Keeping in line with the Board's target to deliver at least 8 pence per share dividend per year in 2018 and 2019, the group announced a full year dividend of 8.0 pence, up by 3%, against the 7.8 pence announced in 2017.

Share Price Performance

Daily Chart as at July-12-19, after the market closed (Source: Thomson Reuters)

On 12th July 2019, ITV shares closed at GBX 111.15 and increased by 1.739 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 177.60/GBX 102.65. The company’s stock beta was 1.14, reflecting higher volatility as compared to the benchmark index.

Valuation Methodology


Conclusion
The company operates a sustainable and cash generative business, delivering continued value for shareholders. Though the economic and political uncertainty continues to impact the demand for advertising, the company reported an increase in advertising revenue in 2018, signifying the steady business strategy adopted by the group.

The structural demands of the business are also changing, with a turn towards online content. Keeping up with this trend, the company has responded to it; evident from strong viewing performance reported by the company for 2018. The company also expects to introduce BritBox in H2 of the year and it has made good progress in delivering its strategy.

While the performance in the first half of the financial year is expected to be impacted by the ongoing political and economic uncertainties and its impact on the demand for advertising, over the year, the group expects to deliver good organic revenue growth in ITV Studios and double-digit growth in online revenue.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the closing price of GBX 111.15 (as on 12^th July 2019) based on 9.44x NTM Price/Earnings (approx.) on FY19E earnings per share (approx).

Murray International Trust PLC

Murray International Trust PLC (MYI) is a United Kingdom-based diversified investment trust company. The company investment objective is to achieve a total return greater than its benchmark by investing mainly in equities globally. The company’s assets are invested in a diversified portfolio of fixed income securities, and worldwide equities spread over a range of economies and industries.

Dividend
On 25^th April 2019, The Board had declared a first interim dividend per share in respect of the year ending 31^st December 2019 of 12 pence net, an increase as compared to 11.5 pence in 2018. The dividend will be payable on 16^th August 2019 to Ordinary shareholders on the register on 5^th July 2019.

Financial Highlights (FY2018, £’000)

(Source: Annual Report, Company Website)

The NAV total return for the year 2018 with net dividends reinvested stood at negative 7.5 per cent as compared with a return on the benchmark of negative 5.2 per cent. The income received for the year to 31^st December 2018 stood at £77.11 million, a decrease from the financial year 2017 of £79.47 million, consisting primarily of dividend and interest income from the listed investment. Net assets decreased by 11.2 per cent to £1,419.6 million as compared with the financial year 2017 of £1,599.1 million. The company’s market capitalisation reduced by 10.5 million to £1,450.6 million against the previous year data. Net asset value per ordinary share stood at 1,107.8 pence, a decrease of 11.5 per cent against the 1,251.4 pence in FY17. Revenue return per share decreased by 4.2 per cent to 49.6 pence as compared with last year data. Total loss before taxation stood at £112.3 million. Total loss attributable to equity shareholders was £118.5 million. Total loss per share stood at 92.6 pence. Ongoing charges ratio was 0.69 per cent (2017: 0.64 per cent).

Share Price Performance

Daily Chart as at July-12-19, after the market closed (Source: Thomson Reuters)

On 12th July 2019, MYI shares closed at GBX 1,166 and increased by 0.517 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 1,212/GBX 1,044. The company’s stock beta was 0.71, reflecting lower volatility as compared to the benchmark index.

Conclusion
Risk of incomplete or inaccurate revenue recognition, including the classification of special dividends as revenue or capital items in the income statement. The main risk of incorrect valuation and defective title of the investment portfolio. Increasing protectionism, deteriorating asset quality and liquidity crunch can retard the business growth. From 2015, the Federal Reserve had increased interest rates nine times. The cumulative effect of these rate hike finally took its toll on the international equity markets. Geopolitical tensions such as persistent protectionism, Brexit uncertainties present difficult times ahead. The company’s portfolio will focus on global diversification in pursuit of the company’s long-term investment objectives.

Based on the above factors, we recommend investors to “AVOID” taking fresh positions at the closing price of GBX 1,166 (as on 12^th July 2019).
 
*All forecasted figures have been taken from Thomson Reuters.

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