Goldman Sachs downgrades Pearson in media sector review

PearsonUBM replaces Pearson in Goldman Sachs’s media sector ‘conviction buy list’. Heavyweight broker Goldman Sachs reckons the quality of media assets is improving, but that has not stopped it downgrading sector behemoths Pearson (LON:PSON) and Informa (LON:INF).

In general, its view is that the outlook is improving most for agencies and broadcasters, but it has removed British Sky Broadcasting (LON:BSY) from its ‘conviction buy’ list, as it sees better opportunities elsewhere, though the pay-TV operator remains a ‘buy’ in the broker’s view.
UBM (LON:UBM) is the only London-listed media stock on Goldman’s ‘conviction buy’ list (CL).

Broadcaster ITV (LON:ITV) and advertising conglomerate WPP (LON:WPP) are accorded ‘buy’ ratings while Informa, Pearson and Reed Elsevier (LON:REL) are given ‘neutral’ ratings.

Daily Mail owner Daily Mail & General Trust (LON:DMGT) is the only UK-listed media stock that Goldman would sell, currently. Though it has a relatively successful digital strategy, and a collection of attractive business-to-business assets, overall structural growth remains low.

“Overall, we argue investors should pay more for the sector given the improved outlook for growth and returns; our valuations apply an average target P/E [price/earnings] of 15.9x compared to the 2003-07 average of 13.9x,” Goldman Sachs’s lengthy note said.

“UBM (CL Buy) has the highest exposure to Events which we view as one of the best structural areas in our sector, while we believe its structural position will improve as it becomes an Events pure play,” Goldman Sachs (GS) said.

For the full story click Proactive Investors