media@db
The strong goodbye
Paul Reynolds
Research Analyst
(44) 20 754-76539
paul.reynolds1@db.com
Mark Braley, ACA
Research Analyst
(44) 20 754 59904
mark.braley@db.com
Patrick Kirby
Research Analyst
(44) 20 754 73560
patrick.kirby@db.com
Deutsche Bank AG/London
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factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
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http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
Periodical
Euro Media Sector Performance
13/02/09
F M A M J J A S O N D J F
55
60
65
70
75
80
85
90
95
100
105
DJ STOXX 600 E - PRICE INDEX
DJ STOXX600 MEDIAE - PRICE INDEX
Source: Thomson Datastream
Table of Contents
BSkyB Pg 04
MTG Pg 05
Publicis Pg 08
RCS MediaGroup Pg 16
Reed Elsevier (UK) Pg 18
TF1 Pg 31
Vivendi SA Pg 32
Global Markets Research Company
Reed Elsevier – BUY, 700p tgt - CEO's last hurrah; ignore the FX debt stories
Reed Elsevier reports FY-08 results on 19-Feb. We expect the outgoing CEO to
preside over a strong set of final figures. There may be a "bear scare" re y/e
leverage, inflated by FX: we est. YE08 net debt / EBITDA at 3.5x, but this falls to
2.4x at end 09, due to cash generation and the application of consistent P&L and
B/S FX rates. After raising ￡1.0bn of new debt in Jan-09 and with some loosening
in credit markets, REL’s financing needs in 2009/10 now look very manageable.
Management change always raises risks and REL’s new CEO is an unknown. But
for once we are quite relaxed: 1) we know REL can’t make big acquisitions right
now – the B/S isn’t that strong, 2) we know that REL can’t make big disposals
right now – the sale of RBI has only just failed, 3) if the incoming CEO does want
to change strategy or to “kitchen sink” the figures, he can’t really do it until H1-09
results (August). And what would a strategy change be at REL? Fundamentally this
is a fairly robust, stable set of assets, where the cost base has been well managed
and where the transition of the business model to online is well advanced. On 10x
09 PE we reiterate our BUY stance.
Vivendi – BUY, E25.5 tgt - pay up for visibility
We believe that Vivendi, at 8x 09E PE, a 7% yield, a strong B/S and with some
visibility is exactly the sort of name investors should own in the context of wider
market uncertainty over earnings in coming quarters. Recent downgrades have
made much of Vivendi’s problems. Yet what do they amount to? An accounting
deferral at Games (no cash impact), a realization that Canal+ 2010 EBITA guidance
will not be hit – in fact already announced in November on the Q3-08 call, and
more prudence in factoring in tax charges at SFR which is reasonable but small.
The real news is that Neuf has some work ahead of it to address operational
weakness after years of M&A led growth. But this is a Company-specific issue we
believe the management should be able to address. We expect the market to pay
a premium for profit growth and visibility based on 55% subscription revenues
from economically insensitive areas. Cashflow is strong and investors now have
comfort EPS should be low enough. Vivendi has a clear dividend policy to pay
minimum 50% of EPS which currently represents a 7% yield, limiting downside.
Vivendi offers 6.5% EPS cagr to 2011 v sector EPS of -17% for 09E and 0% for
the market. We reiterate Buy.
Publicis – HOLD, E22 tgt – Q4-08 better than expected, but call is about 09/10
Publicis’ Q4 was better than expected (+1.1% organic growth vs -1.7% est) and
FY margins were also ahead: 16.7% vs 16.2% est. The Q4 organic performance
was markedly better than Omnicom (at -2.3%). But we expect performance for all
agencies to converge, downwards, in coming quarters. The investment debate on
ad agencies currently is whether the prospect of eventual recovery outweighs the
drag of, say, three quarters of deteriorating numbers. The trading risk for agencies,
as late cycle businesses, is that the downcycle is more protracted than consensus
assumes with 2010 recovery correspondingly deferred. Valuation for Publicis is
undemanding in a historic context 9.9x 2010 P/E, but the shares are already at a
premium to both Media (8.3x) and the market average. Hold maintained.

Table of Contents
BSkyB ................................................................................................. 4
Sky wins Football deal: more about the franchise than EPS .....................................................4
MTG.................................................................................................... 5
Q4 Review: Bulgaria continues to plague the investment thesis..............................................5
Solid quarter – bleak outlook.....................................................................................................6
Publicis ............................................................................................... 8
2008 results: finishing the year more strongly than expected ..................................................8
Trading background ..................................................................................................................9
Valuation ................................................................................................................................15
Risks ......................................................................................................................................15
RCS MediaGroup............................................................................. 16
FY08 preliminary results in line with DBe; Hold confirmed .....................................................16
FY08 preliminary results..........................................................................................................17
Risks ......................................................................................................................................17
Reed Elsevier (UK) ........................................................................... 18
FY-08 preview - the strong goodbye.......................................................................................18
2008 results preview...............................................................................................................19
Valuation & risks......................................................................................................................22
Sources of EPS growth...........................................................................................................23
Retention of RBI......................................................................................................................24
ChoicePoint – likely to miss?...................................................................................................26
Estimates ...............................................................................................................................27
TF1 .................................................................................................... 31
FY08 Results Preview. All about the outook... ........................................................................31
Vivendi SA........................................................................................ 32
Seeing the bigger picture........................................................................................................32
Valuation ................................................................................................................................33
Revisions to estimates............................................................................................................35