Report sees investor caution on TV stocks


The quarterly report on TV stock valuations on Wall Street from the media investment bank MC Alcamo & Co. wasn’t really what Michael Alcamo was expecting. EBITDA multiples were down from a year ago and Alcomo thinks the sector appears to be undervalued by nearly 15%.

Effective with the close of trading December 31, 2010, the six pure-play TV broadcasters were valued at an average multiple of 8.7 x trailing 12-months EBITDA – down 20% from 10.7 x a year previously, and down 10% from 9.6 x three months ago.

Multiples at nine integrated media firms that own broadcast assets recovered only slightly from their September 30 levels, and remained at a discount. The nine traded at 6.1 x, up, down nearly 25% from 8.0 x a year earlier.

“Investors remain cautious about broadcast – despite rising profitability, improved credit profiles, a good outlook for 2011, an exceptional outlook for 2012, and audience trends all pointed in the right direction. The sector appears undervalued by nearly 15%,” Michael Alcamo, President of the investment bank.

Despite strong revenue and EBITDA growth in 2010, TV stock valuations still lag the broader market.

“Given the strong revenue recovery and improving cost situation at all major broadcasters, and the high beta of broadcasters, it seems incongruous that share prices have lagged behind the broader index,” said Alcamo.

But he sees better days ahead.

“The political season brought margin expansion and improved cash positions, and broadcasters go into 2011 in a position of strength. As investors take notice of the coming political season in 2012, we expect share prices to revert upward,” Alcamo said.

RBR-TVBR observation: Public market multiples will to some extent reflect private market multiples. We haven’t had any major M&A action lately to set the private market multiple for television stations. However, the recent big deal in radio at an eight times cash flow multiple is the new standard there and some reverberation was felt through TV stock pricing as well.