Broadcasters – Negative Sentiment from Hedge Funds as Shares Rally

The global media moguls congregated in Barcelona this week for the Morgan Stanley TMT conference. No doubt, there will be an upbeat atmosphere as the sector continues to show signs of growing recovery. The television broadcasting industry has been particularly bullish of late, with key players seeing share prices reach new annual highs but the outlook for 2011 remains uncertain. We look at investor sentiment towards broadcast leaders including: ITV Plc (LON:ITV), ProSiebenSat.1 Media AG (PETR:PSM), Television Francaise 1 SA (EPA:TFI), Sky Deutschland AG (ETR:SKYD), British Sky Broadcasting (LON:BSY), Liberty Global (NASDAQ:LBTYA), Astral Media Inc (TSE:ACM.A) and Corus Entertainment (TSE:CJR.B).
 
British Sky Broadcasting has reported that the renewed offer from News Corp could drag into mid-2011. One way of gauging investor sentiment towards the future profitability is to observe how much is in the hands of large, long term investors and whether this is changing. Institutional ownership in BSkyB which we deduce from looking at holdings of funds who lend their shares, is at an annual high of 285 million shares. There has been a high proportion of borrowing in the stock since late September, increasing quantity on loan from 8 million to 80 million shares. However, this is likely to be due to dividend arbitrage which is usually observed 30 days prior to and post a dividend. Short interest is low in News Corp at 0.8%.
 
As the festive season draws near, the familiar sound of TV jingles fill our living rooms. ITV has definitely got something to sing about as it reported a 16% climb in advertising revenue over the third quarter this week. The company concedes that this growth is expected to slow over the last quarter and admits that significant challenges still lie ahead. Short interest increased over the past month from 1.6% to 2.4% of total shares outstanding, whilst institutional ownership continues to climb to 1,124 million shares, just off the annual high reached in October.
 
Television Francaise 1 SA reported strong third-quarter results last week prompting an increase in share price. Short interest has increased since September from 4% to 5.6%. The popular French broadcaster is a heavily utilized stock with currently over 40% of the lendable supply out on loan, which is more than double of the EMEA Media sector. Institutional ownership has held steady at around 22 million shares over the year.

Canadian broadcasters Astral Media Inc and Corus Entertainment have seen their share prices hit 52-week highs recently. Yet short interest in Astral Media has increased from 9% to 11% over the past month, whilst institutional ownership has also increased from 16.5 million to 18 million shares. Corus Entertainment has also seen a gradual increase in institutional ownership over the past year from 22 million to 24.5 million, while short interest remains insignificant in this thinly trading stock.

German owned, ProSiebenSat.1 Media AG, Europe’s second largest broadcaster beat market expectations as it reported third-quarter earnings early this month, driven by increased advertising revenue. The share price of the broadcaster has more than doubled over the past year, reaching a new 52-week high earlier this month. This bullish outlook has been adopted by short sellers who have been covering their positions over the year, with short interest declining from 4% in January to 1% of total shares outstanding on loan. Funds who lend have been gradually increasing their positions over the year, with current levels just off the annual high at 17 million shares.

Sky Deutschland AG has for years been dogged by sluggish financial performance but recently announced a narrowing loss over its third-quarter. Short sellers surged to cover positions over the last two weeks of September decreasing short interest from 7% to 2% and it remains steady at this level. Institutional investors also seem to be bullish towards the stock increasing their holdings by 10 million to 48 million shares.
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