JPM European Media Internet 2019 Outlook_watermark

vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

Pearson: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A	FY17A	FY18E	FY19E	FY20E
Revenue	4,552	4,513	4,303	4,378	4,424		Cash flow from operating activities	556	675	561	678	736
COGS	-	-	-	-	-		o/w Depreciation & amortization	150	162	178	192	205
Gross profit	-	-	-	-	-		o/w Changes in working capital	82	163	0	(15)	(15)
SG&A	-	-	-	-	-
Adj. EBITDA	785	738	736	832	925		Cash flow from investing activities	(185)	189	(204)	(278)	(230)
D&A	(150)	(162)	(178)	(192)	(205)		o/w Capital expenditure	(247)	(235)	(224)	(228)	(230)
Adj. EBIT	635	576	558	639	720		as % of sales	5.4%	5.2%	5.2%	5.2%	5.2%
Net Interest	(59)	(79)	(30)	(38)	(37)
Adj. PBT	576	497	528	602	683		Cash flow from financing activities	(618)	(1,658)	(345)	(223)	(189)
Tax	(95)	(55)	32	(126)	(143)		o/w Dividends paid	(424)	(318)	(132)	(223)	(189)
Minority Interest	(2)	(2)	(2)	(2)	(2)		o/w Shares issued/(repurchased)	(20)	(149)	(150)	0	0
Adj. Net Income	479	440	557	473	537		o/w Net debt issued/(repaid)	(251)	(1,297)	0	0	0
Reported EPS	58.84	54.06	71.44	60.74	68.97		Net change in cash	(247)	(794)	11	178	316
Adj. EPS	58.84	54.06	71.44	60.74	68.97			421	287	287	430	543
DPS	52.00	17.00	28.58	24.29	27.59		Adj. Free cash flow to firm
							y/y Growth	107.4%	(31.8%)	(0.1%)	50.2%	26.3%
Payout ratio	88.4%	31.4%	40.0%	40.0%	40.0%
Shares outstanding	814	814	780	779	779

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	1,424	630	641	819	1,135		Gross margin	-	-	-	-	-
Accounts receivable					-		EBITDA margin	17.2%	16.4%	17.1%	19.0%	20.9%
Inventories					-		EBIT margin	13.9%	12.8%	13.0%	14.6%	16.3%
Other current assets	0	0	0	0	0		Net profit margin	10.5%	9.7%	13.0%	10.8%	12.1%
Current assets	1,424	630	641	819	1,135		Organic Revenue growth	(7.7%)	(2.0%)	(0.2%)	0.7%	1.0%
PP&E	8,642	7,258	7,204	7,255	7,295		Net debt/EBITDA	1.4	0.6	0.6	0.3	(0.1)
LT investments					-
Other non current assets	0	0	0	0	0		Sales/Assets (x)	0.4	0.5	0.5	0.6	0.5
Total assets	10,066	7,888	7,845	8,074	8,431		Assets/Equity (x)	2.0	2.1	1.9	1.9	1.8
							Interest cover (x)	13 3	9.3	24.5	22.0	25.0
Short term borrowings					-		Tax rate	16.5%	11.1%	6.0%	21.0%	21.0%
Payables	3,202	2,814	2,584	2,700	2,716
Other short term liabilities	0	0	0	0	0		Revenue y/y Growth	1.9%	(0 9%)	(4.7%)	1.8%	1.0%
Current liabilities	3,202	2,814	2,584	2,700	2,716		EBITDA y/y Growth	(10.0%)	(6.0%)	(0.3%)	13.1%	11.2%
Long-term debt	2,516	1,053	1,053	1,053	1,053		EPS y/y Growth	(16.3%)	(8.1%)	32.1%	(15.0%)	13.6%
Other long term liabilities	0	0	0	0	0
Total liabilities	5,718	3,867	3,637	3,753	3,769
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	4,344	4,013	4,198	4,308	4,646		P/E (x)	15 5	16.9	12.8	15.0	13.2
Minority interests	4	8	10	12	15		FCFE Yield	4.7%	3.1%	3.6%	5.6%	7.1%
Total liabilities & equity	10,066	7,888	7,845	8,074	8,431		EV/EBITDA (x)	11.0	10.8	10.4	9.0	7.7
							Dividend Yield	5.7%	1 9%	3.1%	2.7%	3.0%
Net debt/(cash)	1,092	423	412	234	(82)

Source: Company reports and J.P. Morgan estimates.

Note: £ in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

61

vk.com/id446425943

Daniel Kerven (44-20) 7134-3057

daniel [e-mail]

Overweight

Company Data

Price (€)	16.75
Date Of Price	07 Dec 18
Price Target (€)	30.00
Price Target End Date	30-Sep-19
52-week Range (€)	33.04-16.45
Market Cap (€ bn)	3.83
Shares O/S (mn)	229

Pro7 DCF (€m)

WACC	9.8%
G	2.5%
NPV 2018-30	4,837
Terminal value	4,469
EV	9,306
Less Net Debt	-2,099
Add Assoc / Stakes	100
Less minorities	-528
Equity	6,778
Equity value / share (€)	30.0

Source: J.P. Morgan estimates.

Europe Equity Research

10 December 2018

ProSiebenSat.1

ProSiebenSat.1 (PSMGn.DE;PSM GR)

FYE Dec	2017A	2018E	2018E	2019E	2019E
		(Prev)	(Curr)	(Prev)	(Curr)
Adj. EPS FY (€)	2.40	2.38	2.34	2.07	1.97
Revenue FY (€ mn)	4,078	3,999	3,991	4,157	4,151
Adj EBITDA FY (€ mn)	1,050	1,027	1,015	974	949
EBITDA Margin FY	25.8%	25.7%	25.4%	23.4%	22.9%
Adjusted EBIT FY (€ mn)	871	869	855	814	781
Adjusted Diluted NP FY (€	550	549	536	478	445
mn)
Net debt / (cash) FY (€ mn)	1,632	1,581	2,099	1,557	2,057
DPS (Net) FY (€)	1.93	1.91	1.17	1.03	0.98

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks ProSiebenSat.1 (Overweight; Price Target: €30.00)

Investment Thesis

The significant de-rating over the past year creates, in our view, an exceptional opportunity to buy into the fastest-growing, most innovative and diversified broadcaster at what we consider a compelling valuation. Pro7 is more than just a broadcaster. It is using its existing programming spend and ad inventory to drive multiple revenue streams from distribution, digital entertainment, content and commerce. We believe it can return to mid-single-digit organic growth and that either buybacks, or preferably M&A, can help drive double-digit EPS growth.

Valuation

We decrease our PT from €40 to €30 as we increase our WACC from 8.5% to 9.8% to reflect the lower attractiveness of broadcasters in the current macro cycle. Pro7 trades on 7.8x headline 2019E earnings and offers a dividend yield of 6% at current levels. On an ex-dividend basis, it will trade on just 7.2x earnings.

Risks to Rating and Price Target

The following risks could prevent the stock from achieving our target price and rating: 1) A more rapid-than-expected deterioration of the economic and advertising environment in Germany in 2018 / 2019; and 2) lower-than-expected growth in revenues and profits from diversification.

62

vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

ProSiebenSat.1: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A	FY17A	FY18E	FY19E	FY20E
Revenue	3,799	4,078	3,991	4,151	4,330		Cash flow from operating activities	589	565	824	469	568
COGS	-	-	-	-	-		o/w Depreciation & amortization	206	263	205	212	218
Gross profit			-	-	-		o/w Changes in working capital	(14)	(88)	0	(15)	(15)
SG&A	-	-	-	-	-
Adj. EBITDA	1,017	1,050	1,015	949	1,041		Cash flow from investing activities	(489)	309	(364)	(40)	(35)
D&A	(206)	(263)	(205)	(212)	(218)		o/w Capital expenditure
Adj. EBIT	867	871	855	781	867		as % of sales	-	-	-	-	-
Net Interest	(84)	(83)	(86)	(84)	(81)
Adj. PBT	748	778	764	663	751		Cash flow from financing activities	619	(472)	(496)	(268)	(226)
Tax	(206)	(165)	(212)	(201)	(227)		o/w Dividends paid	(406)	(449)	(446)	(268)	(226)
Minority Interest	(8)	(10)	(16)	(18)	(23)		o/w Shares issued/(repurchased)	515	0	(50)	0	0
Adj. Net Income	536	550	536	445	501		o/w Net debt issued/(repaid)	510	(23)	0	0	0
Reported EPS	1.96	2.06	0.18	1 55	1.89		Net change in cash	719	402	(36)	161	307
Adj. EPS	2.37	2.40	2.34	1.97	2.22			589	565	824	469	568
DPS	1.90	1.93	1.17	0.98	1.11		Adj. Free cash flow to firm
							y/y Growth	(10.9%)	(4.0%)	45.8%	(43.1%)	21.2%
Payout ratio	97.0%	93.7%	658.8%	63.4%	58.7%
Shares outstanding	226	229	229	226	226

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	1,271	1,552	1,085	1,127	1,319		Gross margin	-	-	-	-	-
Accounts receivable	1,958	1,915	2,205	2,170	2,155		EBITDA margin	26.8%	25.8%	25.4%	22 9%	24.0%
Inventories							EBIT margin	20.4%	20.1%	17.5%	16.6%	18.3%
Other current assets	0	0	0	0	0		Net profit margin	14.1%	13.5%	13.4%	10.7%	11.6%
Current assets	3,229	3,467	3,290	3,297	3,474		Organic Revenue growth	-	-	-	-	-
PP&E	3,374	3,102	3,424	3,420	3,412		Net debt/EBITDA	188.2%	155.4%	206.8%	216.7%	179.2%
LT investments					-
Other non current assets	0	0	0	0	0		Sales/Assets (x)	0.6	0.6	0.6	0.6	0.6
Total assets	6,603	6,569	6,714	6,717	6,885		Assets/Equity (x)	5.0	4.9	5.6	5.9	5.4
							Interest cover (x)	12.1	12.7	11.8	11.3	12.8
Short term borrowings							Tax rate	27.5%	21.2%	27.8%	30 3%	30.2%
Payables					-
Other short term liabilities	1,986	2,133	2,423	2,373	2,343		Revenue y/y Growth	16.5%	7.3%	(2.1%)	4.0%	4.3%
Current liabilities	1,986	2,133	2,423	2,373	2,343		EBITDA y/y Growth	9.8%	3.3%	(3.3%)	(6 5%)	9.7%
Long-term debt	3,185	3,184	3,184	3,184	3,184		EPS y/y Growth	9.6%	1.4%	(2.5%)	(16.1%)	12.7%
Other long term liabilities	0	0	0	0	0
Total liabilities	5,171	5,317	5,607	5,557	5,527
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	1,432	1,252	1,107	1,160	1,358		P/E (x)	7.1	7.0	7.1	8.5	7.6
Minority interests							FCFE Yield	13.3%	12.6%	10.3%	9 3%	11.9%
Total liabilities & equity	6,603	6,569	6,714	6,717	6,885		EV/EBITDA (x)	5.8	5.3	5 9	6.3	5.6
							Dividend Yield	11.3%	11.5%	7.0%	5 9%	6.6%
Net debt/(cash)	1,914	1,632	2,099	2,057	1,865

Source: Company reports and J.P. Morgan estimates.

Note: € in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

63

vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

Overweight

Company Data

Price (€)	48.45
Date Of Price	07 Dec 18
Price Target (€)	68.00
Price Target End Date	31-Dec-19
52-week Range (€)	63.18-47.79
Market Cap (€ mn)	11,162.14
Shares O/S (mn)	230

Publicis Groupe

Publicis Groupe (PUBP.PA;PUB FP)

FYE Dec	2017A	2018E	2019E	2019E
			(Prev)	(Curr)
Adj. EPS FY (€)	4.36	4.20	4.42	4.39
Adj P/E FY	11.1	11.5	11.0	11.0
Revenue FY (€ mn)	9,690	9,382	9,676	9,610
Adj.EBITA FY (€ mn)	1,505	1,479	1,562	1,551
Adj.EBITA Margin FY	15.5%	15.8%	16.1%	16.1%
DPS (Net) FY (€)	2.00	2.10	2.21	2.19
Net Income adjusted FY (€	1,005	973	1,029	1,021
mn)
Dividend Yield FY	4.1%	4.3%	4.6%	4.5%

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks Publicis Groupe (Overweight; Price Target: €68.00)

Investment Thesis

The ad agency sub sector has seen a major derating over the last two years driven by concerns around disintermediation and increased competitive pressure from consultancies. We see value at this stage - the share price factors in flat growth for the next two years which we consider as too harsh. The shares trading on 10.6x 2019 P/E offers risk to the upside.

Valuation

We value all Agencies on a DCF basis. Our Dec 2019 target price based on a WACC of 8% and terminal growth rate of 2% is €68 (from €76).

Publicis: J.P. Morgan DCF analysis

€ million, as at 31 Dec 18E

Present Value of FCF (20-27) (€m)	6,032
Present value of Terminal Value (€m)	9,787
Total Enterprise Value (€m)	15,819
Net (Debt)/cash FY19 (€m) - including earn-out	373
Pension deficit	(333)
Associates	-70
Minorities	0
Equity Value (€m)	15,789
Fully diluted Shares (m)	232.7
Publicis Equity Value per Share (€)	67.9
Discount applied to fair value	0.0%
DCF Target price (€)	68

Source: J P. Morgan estimates

Risks to Rating and Price Target

The following risks could prevent the stock from achieving our target price and rating: 1) worse-than-expected economic and advertising environment (particularly following Brexit); 2) disruption to the underlying business as a result of management distraction from structure change; 3) value-destroying acquisitions; 4) difficulties integrating Sapient, lower-than-expected cost synergies, and lower-than-expected underlying growth performance from Sapient; 5) significant loss of media/creative accounts; and 6) Increased competition from IT/Consultancy firms.

64

vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

Publicis Groupe: Summary of Financials

Income Statement	FY16A FY17A FY18E FY19E FY20E
Revenue	9,733	9,690	9,382	9,610	9,770
COGS	-	-	-	-	-
Gross profit	-	-	-	-	-
SG&A	-	-	-	-	-
Adj. EBITDA	1,682	1,666	1,639	1,709	1,690
D&A	(166)	(161)	(159)	(159)	(156)
Adj. EBIT	1,516	1,505	1,479	1,551	1,534
Net Interest	(182)	(127)	(127)	(131)	(116)

Cash Flow Statement		FY16A FY17A FY18E FY19E FY20E
Cash flow from operating activities	1,072		1,487	1,351	1,399	1,408
o/w Depreciation & amortization	166		161	159	159	156
o/w Changes in working capital		(355)	69	0	0	0
	(411)		(417)	(139)	(159)	(156)
Cash flow from investing activities
o/w Capital expenditure	(173)		(136)	(139)	(159)	(156)
as % of sales	1.8%		1.4%	1.5%	1.7%	1.6%

Adj. PBT	1,334	1,378	1,352	1,420	1,418		Cash flow from financing activities	(237)		(514)	(505)	(532)	(558)
Tax	(415)	(358)	(365)	(383)	(369)		o/w Dividends paid	(213)		(180)	(462)	(489)	(515)
Minority Interest	(7)	(10)	(10)	(10)	(10)		o/w Shares issued/(repurchased)	-		(291)	0	0	0
Adj. Net Income	1,015	1,005	973	1,021	1,034		o/w Net debt issued/(repaid)	20		(8)	(8)	(8)	(8)
Reported EPS	4.46	4 36	4 20	4.39	4.42		Net change in cash		550	177	707	708	693
Adj. EPS	4.46	4.36	4.20	4.39	4.42			1,024		1,445	1,305	1,336	1,337
DPS	1.85	2.00	2.10	2.19	2.21		Adj. Free cash flow to firm
							y/y Growth	(17.2%)		41.1%	(9.7%)	2.4%	0.1%
Payout ratio	41.5%	45 9%	50.0%	50.0%	50.0%
Shares outstanding	228	231	232	233	234
Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis		FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	2,228	2,407	2,855	3,284	3,683		Gross margin	-		-	-	-	-
Accounts receivable	10,010	9,750	9,750	9,750	9,750		EBITDA margin	17.3%		17.2%	17 5%	17.8%	17.3%
Inventories	406	385	385	385	385		EBIT margin	15.6%		15.5%	15.8%	16.1%	15.7%
Other current assets	698	711	649	649	649		Net profit margin	10.4%		10.4%	10.4%	10.6%	10.6%
Current assets	13,342	13,253	13,639	14,068	14,467		Organic Revenue growth	0.7%		0.8%	0.8%	1 5%	1.6%
PP&E	640	590	510	447	383		Net debt/EBITDA	0.7		0.6	0.2	(0.2)	(0.6)
LT investments	419	363	363	363	363
Other non current assets	10,495	9,574	9,380	9,163	8,970		Sales/Assets (x)	0.4		0.4	0.4	0.4	0.4
Total assets	24,896	23,780	23,892	24,041	24,182		Assets/Equity (x)	4.0		4.1	3.8	3.6	3.4
							Interest cover (x)	9 2		13.1	12.9	13.1	14.6
Short term borrowings	283	350	350	350	350		Tax rate	31.1%		26.0%	27.0%	27.0%	26.0%
Payables	11,992	11,541	11,541	11,541	11,541
Other short term liabilities	2,323	2,141	2,125	2,125	2,125		Revenue y/y Growth	1.4%		(0.4%)	(3.2%)	2.4%	1.7%
Current liabilities	14,598	14,032	14,016	14,016	14,016		EBITDA y/y Growth	1.3%		(1.0%)	(1.6%)	4 3%	(1.1%)
Long-term debt	3,028	2,780	2,426	2,072	1,726		EPS y/y Growth	1.6%		(2.3%)	(3.6%)	4 5%	0.8%
Other long term liabilities	1,205	1,010	1,010	1,010	1,010
Total liabilities	18,831	17,822	17,452	17,098	16,752
							Valuation		FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	6,055	5,956	6,437	6,940	7,427		P/E (x)	10 9		11.1	11.5	11.0	11.0
Minority interests	10	2	2	3	4		FCFE Yield	-		-	-	-	-
Total liabilities & equity	24,896	23,780	23,892	24,041	24,182		EV/EBITDA (x)	1.0		0 9	0.4	0.0	NM
							Dividend Yield	3.8%		4.1%	4.3%	4 5%	4.6%
Net debt/(cash)	1,244	1,059	343	(373)	(1,074)

Source: Company reports and J.P. Morgan estimates.

Note: € in millions (except per-share data) Fiscal year ends Dec. o/w - out of which

65

vk.com/id446425943

Daniel Kerven (44-20) 7134-3057

daniel [e-mail]

Overweight

Company Data

Price (p)	1,610
Date Of Price	07 Dec 18
Price Target (p)	1,840
Price Target End Date	31-Mar-19
52-week Range (p)	1,751-1,399
Market Cap (£ bn)	17.39
Shares O/S (mn)	1,081

RELX Group: J.P.Morgan DCF analysis

£ million, as at 30 Jun 2019E

WACC	7.8%
Terminal growth	2.2%
NPV of cash flows to 2027E	17,552
NPV of Terminal Value	25,668
Implied Enterprise Value	43,219
Net debt	-5,585
Pensions	-100
Value prop. Consol.	-96
Implied Equity Value	37,438
NOSH (m) - combined	2035
Fair Value of PLC shares (p)	1,840

Europe Equity Research

10 December 2018

RELX PLC

RELX PLC (REL.L;REL LN)

FYE Dec	2017A	2018E	2018E	2019E	2019E
		(Prev)	(Curr)	(Prev)	(Curr)
Adj. EPS FY (p)	80.22	85.29	85.36	94.21	94.88
Revenue FY (£ mn)	7,341	7,556	7,566	8,038	8,121
EBITDA FY (£ mn)	2,556	2,648	2,650	2,838	2,857
EBITA (Calc) FY (£ mn)	2,284	2,368	2,370	2,540	2,556
Operating margin FY	31.1%	31.3%	31.3%	31.6%	31.5%
Pretax Profit Adjusted FY	2,101	2,170	2,172	2,342	2,359
(£ mn)
Net Att. Income FY (£ mn)	1,620	1,684	1,686	1,818	1,831
DPS (Gross) FY (p)	39.40	42.64	42.68	47.10	47.44
Adj P/E FY	20.1	18.9	18.9	17.1	17.0

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks

RELX PLC (Overweight; Price Target: 1,840p)

Investment Thesis

We maintain our Overweight rating. RELX offers structural growth supported by increasingly sophisticated information-based analytics and decision-making tools. We expect group organic revenue growth of c4%, EBIT growth of c6% and EPS growth c10% over 18E-21E supported by gradual margin expansion, bolt-on acquisitions and buybacks. RELX’s STM division offers strong cash generation and predictable revenues, which when combined with business and geographic diversification at the group level, results in the best earnings visibility / quality in the media sector. RELX offers a 3% yield and trades on c17.1x 2019E earnings, which is attractive vs staples and its US information peers (-15% discount).

Valuation

Our price target decreases from 1,880p to 1,840p as a result of slightly lower terminal growth (2.2% vs. 2.4%). Our DCF based valuation assumes medium-term organic revenue / EBITA growth of 4% / 5% growth and a WACC of 7.8%.

Risks to Rating and Price Target

1) The business proves less resilient than we expect with greater slowdown in cyclical revenues in parts of R&BA and Exhibitions; 2) Higher product investment higher; 3) FX moves; 4) Financial leverage is higher than expected, and / or cash returns lower than expected; 5) Any negative open access news flow and 6) Any market preference for cyclical stocks over defensives, or investor rotation away from perceived “bond proxy” stocks.

66

vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

RELX PLC: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A FY17A FY18E FY19E FY20E
Revenue	6,895	7,341	7,566	8,121	8,550		Cash flow from operating activities	1,682	1,848	1,934	2,106	2,237
COGS					-		o/w Depreciation & amortization	257	272	280	301	317
Gross profit	-	-	-	-	-		o/w Changes in working capital	(72)	(47)	(42)	(37)	(37)
SG&A					-
Adj. EBITDA	2,371	2,556	2,650	2,857	3,019		Cash flow from investing activities	(677)	(432)	(936)	(563)	(584)
D&A	(257)	(272)	(280)	(301)	(317)		o/w Capital expenditure	(332)	(353)	(364)	(391)	(411)
Adj. EBIT	2,114	2,284	2,370	2,556	2,702		as % of sales	4.8%	4.8%	4.8%	4.8%	4.8%
Net Interest	(180)	(183)	(198)	(197)	(196)
Adj. PBT	1,934	2,101	2,172	2,359	2,506		Cash flow from financing activities	(965)	(1,467)	(897)	(1,551)	(1,666)
Tax	(438)	(473)	(478)	(519)	(551)		o/w Dividends paid	(683)	(762)	(797)	(851)	(916)
Minority Interest	(8)	(8)	(8)	(9)	(9)		o/w Shares issued/(repurchased)	(700)	(700)	(700)	(800)	(950)
Adj. Net Income	1,488	1,620	1,686	1,831	1,946		o/w Net debt issued/(repaid)	393	8	600	100	200
Reported EPS	71 55	80 22	85 36	94.88	103.50		Net change in cash	40	(51)	101	(8)	(14)
Adj. EPS	71.55	80.22	85.36	94.88	103.50			1,537	1,671	1,796	1,940	2,049
DPS	35.95	39.40	42.68	47.44	51.75		Adj. Free cash flow to firm
							y/y Growth	19.9%	8.7%	7.5%	8.0%	5.6%
Payout ratio	50.2%	49.1%	50.0%	50.0%	50.0%
Shares outstanding	2,080	2,019	1,975	1,930	1,880

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	162	111	212	203	190		Gross margin	-	-	-	-	-
Accounts receivable					-		EBITDA margin	34.4%	34.8%	35.0%	35.2%	35.3%
Inventories					-		EBIT margin	30.7%	31.1%	31.3%	31.5%	31.6%
Other current assets	0	0	0	0	0		Net profit margin	21.6%	22.1%	22.3%	22.6%	22.8%
Current assets	162	111	212	203	190		Organic Revenue growth	4.3%	4.1%	4.1%	3.9%	4.0%
PP&E					-		Net debt/EBITDA	2.0	2.0	2.1	2.0	2.0
LT investments					-
Other non current assets	13,161	12,172	12,859	13,148	13,441		Sales/Assets (x)	0.6	0.6	0.6	0.6	0.6
Total assets	13,323	12,283	13,071	13,351	13,631		Assets/Equity (x)	5 5	5.5	5.1	4 9	4.7
							Interest cover (x)	13 2	14.0	13.4	14 5	15.4
Short term borrowings					-		Tax rate	22.6%	22.5%	22.0%	22.0%	22.0%
Payables					-
Other short term liabilities	-	-	-	-	-		Revenue y/y Growth	15.5%	6 5%	3.1%	7.3%	5.3%
Current liabilities	-	-	-	-	-		EBITDA y/y Growth	15.7%	7.8%	3.7%	7.8%	5.7%
Long-term debt	4,843	5,197	5,797	5,897	6,097		EPS y/y Growth	19.4%	12.1%	6.4%	11.2%	9.1%
Other long term liabilities	6,122	4,712	4,675	4,638	4,601
Total liabilities	10,965	9,909	10,472	10,535	10,698
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	2,320	2,353	2,580	2,800	2,919		P/E (x)	22 5	20.1	18 9	17.0	15.6
Minority interests	38	21	19	17	15		FCFE Yield	4.1%	4.7%	5.0%	5.6%	6.1%
Total liabilities & equity	13,323	12,283	13,071	13,351	13,631		EV/EBITDA (x)	9.0	8.4	7.8	7.1	-
							Dividend Yield	2.2%	2.4%	2.7%	2.9%	3.2%
Net debt/(cash)	4,681	5,086	5,585	5,694	5,907

Source: Company reports and J.P. Morgan estimates.

Note: £ in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

67

vk.com/id446425943

Daniel Kerven (44-20) 7134-3057

daniel [e-mail]

Neutral

Company Data

Price (€)	49.36
Date Of Price	07-Dec-18
Price Target (€)	56.00
Price Target End Date	30-Sep-19
52-week Range (€)	72.90-48.58
Market Cap (€ mn)	7,579.87
Shares O/S (mn)	154

RTL DCF (€m)

WACC	9.4%
G	1.5%
NPV 2018-30	6,015
Terminal value	4,544
EV	10,559
Less Net Debt	-560
Less minorities	-1,433
Equity	8,565
No Shares	154
Equity value / share	56

Source: J.P. Morgan estimates.

Europe Equity Research

10 December 2018

RTL

RTL Group (AUDKt.BR;RTL BB)

FYE Dec	2017A	2018E	2018E	2019E	2019E
		(Prev)	(Curr)	(Prev)	(Curr)
Adj.EPS FY (€)	4.83	4.75	4.62	5.00	4.51
Revenue FY (€ mn)	6,373	6,540	6,508	6,819	6,630
EBITDA FY (€ mn)	1,464	1,407	1,364	1,466	1,338
EBITDA Margin FY	23.0%	21.5%	21.0%	21.5%	20.2%
EBIT FY (€ mn)	1,248	1,178	1,162	1,229	1,124
EBIT Margin FY	19.6%	18.0%	17.9%	18.0%	17.0%
Net Profit FY (€ mn)	741	730	710	768	692
DPS (Net) FY (€)	4.00	4.75	3.84	5.00	4.51

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks RTL (Neutral; Price Target: €56.00)

Investment Thesis

We downgrade RTL from OW to Neutral. RTL has outperformed the peers by c7% over the past year. Improving operational momentum stalled in Q3 with a step down in German ad growth which has continued into Q4. We believe this partly reflects the relatively loss of audience share to Pro7 but also weakening macro momentum. It remains to be seen whether this will be short-lived but German ad growth is likely to remain lackluster in Q1 given the timing of Easter which, along with the absence of the World Cup, will benefit Q2.

We cut our 2019 EPS by 10% to reflect a cautious macro backdrop, weaker ad growth, €20m of incremental programming costs for international football and €35m of OTT / streaming investment (content, platforms, data and technology).

RTL trades on 11.0x 2019 NOPAT for 2% 3 year growth vs 10.8x and 4% for the peer group. We are also somewhat frustrated by the slow pace of strategic change – we would like to see a greater sense of urgency and RTL taking a leading role in national / pan-European co-operation & consolidation, and to invest from a position of strength to drive OTT, DTC / distribution fees, smart reach & data driven targeted advertising.

We have a preference for Pro7 which is building a new model for FTA, trades on a similar multiple but offers faster growth. MediaScreen – RTL ranks 26/32 in the slowdown given slow growth and poor earnings momentum. Should we move to contraction it moves up to 16/32 given the increased weighting of value vs growth.

Valuation

Our DCF-based PT decreases from €80 to €56 / share given our lower estimates.

Risks to Rating and Price Target

We see the following risks to our rating and price target: 1) higher/lower-than- expected advertising revenues in '18; and 2) an improvement or deterioration of production profitability.

68

vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

RTL: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A	FY17A	FY18E	FY19E	FY20E
Revenue	6,237	6,373	6,508	6,630	6,809		Cash flow from operating activities	1,107	1,035	960	1,005	1,029
COGS				-	-		o/w Depreciation & amortization	214	218	202	214	222
Gross profit	-	-	-	-	-		o/w Changes in working capital	(83)	(89)	(30)	(20)	(20)
SG&A				-	-
Adj. EBITDA	1,411	1,464	1,364	1,338	1,351		Cash flow from investing activities	(312)	(269)	(249)	(253)	(257)
D&A	(206)	(216)	(202)	(214)	(222)		o/w Capital expenditure	(257)	(239)	(249)	(253)	(257)
Adj. EBIT	1,205	1,248	1,162	1,124	1,129		as % of sales	4.1%	3.8%	3.8%	3.8%	3.8%
Net Interest	(18)	(24)	(25)	(25)	(25)
Adj. PBT	1,187	1,224	1,137	1,099	1,104		Cash flow from financing activities	(863)	(957)	(722)	(721)	(797)
Tax	(363)	(385)	(324)	(313)	(315)		o/w Dividends paid	(16)	(148)	(88)	(80)	(78)
Minority Interest	(96)	(98)	(103)	(94)	(92)		o/w Shares issued/(repurchased)	(1)	1	0	0	0
Adj. Net Income	728	741	710	692	698		o/w Net debt issued/(repaid)	(108)	(205)	0	0	0
Reported EPS	4.74	4.83	4.62	4 51	4.54		Net change in cash	(68)	(191)	(10)	31	(25)
Adj. EPS	4.74	4.83	4.62	4.51	4.54			845	775	623	671	694
DPS	4.00	4.00	3.84	4.51	4.54		Adj. Free cash flow to firm
							y/y Growth	2.9%	(8.3%)	(19.7%)	7.8%	3.3%
Payout ratio	84.4%	82.9%	83.0%	100.0%	100.0%
Shares outstanding	154	154	154	154	154

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	433	265	255	286	261		Gross margin	-	-	-	-	-
Accounts receivable				-	-		EBITDA margin	22.6%	23.0%	21.0%	20.2%	19.8%
Inventories				-	-		EBIT margin	19.3%	19.6%	17 9%	17.0%	16.6%
Other current assets	0	0	0	0	0		Net profit margin	11.7%	11.6%	10 9%	10.4%	10.2%
Current assets	433	265	255	286	261		Organic Revenue growth	-	-	-	-	-
PP&E	7,867	7,629	7,707	7,767	7,822		Net debt/EBITDA	-	-	-	-	-
LT investments	-	-	-	-	-
Other non current assets	0	0	0	0	0		Sales/Assets (x)	0.8	0.8	0.8	0.8	0.8
Total assets	8,300	7,894	7,962	8,053	8,083		Assets/Equity (x)	2.7	2.7	2.6	2.6	2.5
							Interest cover (x)	78.4	61.0	55.1	53.9	54.1
Short term borrowings				-	-		Tax rate	30.6%	31.5%	28 5%	28.5%	28.5%
Payables	3,738	3,655	3,594	3,583	3,585
Other short term liabilities	0	0	0	0	0		Revenue y/y Growth	3.4%	2 2%	2.1%	1 9%	2.7%
Current liabilities	3,738	3,655	3,594	3,583	3,585		EBITDA y/y Growth	3.8%	3.8%	(6.8%)	(1 9%)	1.0%
Long-term debt				-	-		EPS y/y Growth	(6.8%)	1.8%	(4 2%)	(2 5%)	0.8%
Other long term liabilities	1,010	815	815	815	815
Total liabilities	4,748	4,470	4,409	4,398	4,400
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	3,077	2,957	3,070	3,158	3,173		P/E (x)	10.4	10 2	10.7	11.0	10.9
Minority interests	475	467	482	496	510		FCFE Yield	11.0%	10.1%	7.9%	8 5%	8.8%
Total liabilities & equity	8,300	7,894	7,962	8,053	8,083		EV/EBITDA (x)	6.8	6 5	7.0	7.2	6.6
							Dividend Yield	8.1%	8.1%	7.8%	9.1%	9.2%
Net debt/(cash)	-	-	-	-	-

Source: Company reports and J.P. Morgan estimates.

Note: € in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

69

vk.com/id446425943

Daniel Kerven (44-20) 7134-3057

daniel [e-mail]

Neutral

Company Data

Price (€)	7.58
Date Of Price	07 Dec 18
Price Target (€)	8.30
Price Target End Date	31-Dec-19
52-week Range (€)	13.25-7.49
Market Cap (€ bn)	1.61
Shares O/S (mn)	212

TF1: DCF

WACC	9.2%
NPV to 2027E	933
Terminal cashflow (normalised)	162
LT growth rate	0.5%
Terminal Value	1,867
Discounted Terminal Value	774
Enterprise Value	1,708
Associates	0
Less: minorities	-45
Net (debt)/cash end Dec 18E	76
Equity Value	1,739
Shares in Issue (m)	210
Fair Value per share (€)	€ 8.3

Source: J.P. Morgan estimates.

Europe Equity Research

10 December 2018

TF1

TF1 (TFFP.PA;TFI FP)

FYE Dec	2017A	2018E	2019E	2019E
			(Prev)	(Curr)
Adj. EPS FY (€)	0.76	0.61	0.72	0.68
Revenue FY (€ mn)	2,125	2,249	2,318	2,296
EBIT FY (€ mn)	185	187	214	202
DPS (Net) FY (€)	0.35	0.33	0.39	0.37
Dividend Yield FY	4.6%	4.4%	5.1%	4.8%
EBIT Margin FY	8.7%	8.3%	9.2%	8.8%
Adjusted EBITDA FY (€	359	407	277	265
mn)
Adjusted Diluted NP FY (€	159	128	149	140
mn)

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks TF1 (Neutral; Price Target: €8.30)

Forecast Changes

We have reduced our NAR estimate for 2019 /20 from 0% / +1% to -1.5% / 0% to reflect our more cautious view on French TV advertising outlook. As a result our 2019 / 20 EPS decrease by -6% / -15% given the company high operational gearing.

Investment Thesis

We believe TF1’s valuation is unjustified given c10% EPS growth (2018E-21E CAGR), the future benefits from the Belgium ad window, French tax reform in 2020 and the upside for recent distribution deals with telco providers and accretive M&A / cash returns. With limited upside to our Price Target, we remain Neutral as we see European FTA broadcaster performance limited by macro factors and lack of catalysts for TF1.

Valuation

Our Dec-19 DCF-based PT (WACC of 9.2%, terminal growth of 0.5% vs. 1.5% prev.) remains decreases from €11.5 to €8.3 as a result of the decrease in our estimates.

Risks to Rating and Price Target

The following risks that could prevent the stock from achieving our target price and rating include: 1) Better / worse advertising revenues; 2) lower / higher-than-expected operating costs; 3) value-enhancing / diluting acquisitions; 4) unexpected gain/loss of audience share.

70