European Media Strategy and
Data Watch
We expect media defensives to continue to outperform
the market
European Media
Filippo Pietro Lo FrancoAC
(44-20) 7325-9779
filippo.p.lofranco@jpmorgan.com
Mark O'Donnell
(44-20) 7325-7149
mark.x.odonnell@jpmorgan.com
Tim Nollen
(44-20) 7325-9482
tim.nollen@jpmorgan.com
Julie Duval
(44-20) 7325-9414
julie.e.duval@jpmorgan.com
Karim de Baecque
(44-20) 7325-9181
karim.debaecque@jpmorgan.com
J.P. Morgan Securities Ltd.
For Specialist Sales advice, please
contact:
Andrea O'Keeffe
(44-20) 7325-6850
andrea.okeeffe@jpmorgan.com
See page 45 for analyst certification and important disclosures, including non-US analyst disclosures.
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analysis of valuation methodology
and risks on the stocks discussed
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*Please see Media Data Watch
published on 8 October '08 for
definition of defensive media for
full information about the
methodology used to determine
defensive and media stocks Index
• We continue to prefer defensives media with: i) strong balance sheet; and
ii) limited EPS09 risks. Our top picks remain WKR, VIV and PUB, with the
latter expected to outperform later in the year. Defensive media look safer: we
see a short-term buying opportunity in REL and would expect INF to
outperform when the market’s risk aversion to debt leverage improves. We
advise taking profits on TRIL following the +23% vs MSCI and 18% vs DJ
Media outperformance in FY08 and have downgraded the stock to N from OW
(see separate report published today by Mark O'Donnell). Our least preferred
stocks are: LAGA, TL5, HAV, TNI and JPR.
• No "safe havens”, but some defensive media have a low EPS09 risk profile.
We remain conservative on economic and advertising outlook. We expect Q109
to be very tough for media cyclical (EU adspend 09e -7%) and adspend to
trough in Q209 reflecting poor economic data. We analyzed the exposure of
media companies to the different industries and we associate to each industry a
risk profile based on the specific industry outlook in ‘09 WKR, REL, SES and
ETL have the lowest risk profile and the extent of the potential EPS09
downgrade to market consensus should be limited in the 0% to -5% range. We
see Trinity, DMGT, Yell, Seat and PAJ facing a very high risk of EPS cuts up
to more than -20%.
• Media outperformed MSCI Eu in FY08 for the first time in 7 years.
Defensive media* outperformed the market by +13% in FY08 (+15% in
H208). As highlighted in our previous Media Data Watch, the sector has become
much more defensive than in the past cycle with an estimated 65% of weighted
market cap defensive vs 48% in 2005. Cyclical Media could outperform the
market in H209 but in our view this is more a “hope” than a rational forecast.
However, if market sentiment unexpectedly turns bullish we see FTA TVs (TL5,
MTG, TF1 and ITV) as the most geared stocks to an economic upturn.

Table of Contents
Media Strategy..........................................................................4
Media sector at premium to the market........................................................................4
Defensive Media offers lower strong balance sheet and EPS09 risk ...........................4
Risk of EPS downgrade still high in our view........................5
Methodology................................................................................................................5
Healthcare: a revenue driver for few media stocks in 2009.........................................6
FMCGs have a relatively good outlook .......................................................................6
Telecom: we expect limited negative impact on media ...............................................6
Utilities and Oil&Gas: not relevant for media .............................................................7
Legal & Tax: very important for professional publishers ............................................7
Finance/Insurance: not as bad as it looks.....................................................................7
Mass market: the outlook is not very encouraging ......................................................7
Retail: diverging performance between food and discretionary...................................8
Automotive: an industry under pressure ......................................................................8
Property: a negative impact for newspapers ................................................................9
Local: close to 90% of directory’s revenues ................................................................9
Others..........................................................................................................................9
The advertising outlook remains difficult ............................11
We expect the adspend recession to endure in 2009 and stabilize in 2010................11
What if the economic outlook improves...............................13
Performance analysis ............................................................16
Media outperformed MSCI Eu in FY08 for the first time in 7 years .........................16
Professional publishers and advertising agencies were the best performing media
sub-sector in FY08.....................................................................................................16
Pearson, Eutelsat and Thompson Reuters plc have significantly outperformed the
market ........................................................................................................................17
Johnston Press, Yell and ProSieben have been the worst performing stocks.............17
Media cyclical/defensive index discrepancy’s performance is at record levels.........18
Several media stocks traded at their lowest share price ever ion FY08 .....................18
Professional publisher have outperformed the overall market in the last three and five
years..........................................................................................................................19
The search for growth............................................................20
Topline: Pay TV and Professional Publishers to resist best to glum..........................20
Earnings: Professional Publishers to be the only growing sub sector in FY09E .......21
The media sector trades in line with the overall market (excluding financials) on PE.
..................................................................................................................................23
Media macro data ...................................................................26
The J.P.Morgan economists view: In the throes of a deep downturn….....................26
Economics and Advertising ..................................................34
J.P.Morgan 3- and 12-month selected list ............................35
12-month top picks: Wolters Kluwer, Vivendi and Publicis......................................35
3-month selected list portfolio: geared for a potential rebound in cyclical stocks .....36
Valuations ...............................................................................41