ITV plc: Disappointing, Ugly, Troubled, Hated, and Misunderstood

Simon Caufield of SIM Limited presented his investment thesis on ITV plc (UK: ITV) at Best Ideas 2023.

Thesis summary:

ITV, founded in 1955, is the UK’s first and largest free-to-air commercial TV broadcaster. The stock is hated for its cyclical, advertising-based business model and the secular decline of TV broadcasting due to the growth of streaming.

However, broadcast TV revenues are at all-time highs despite the market’s expectation of a decline. In addition, 45% of group revenue comes from the Production Studios business, which is not advertising-based. Finally, ITV owns a valuable back catalog of shows.

Simon’s sum-of-the-parts valuation estimate is 140% above the recent share price. The dividend yield recently amounted to 6.7%.

The CEO is reportedly “fed up” with the stock price performance and may be considering a transaction to unlock value.

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About the instructor:

Simon Caufield is Managing Director at SIM Limited, a UK-based investment firm. Simon founded the firm in 2007 after selling his stake in Nomis Solutions, a B2B enterprise software company he founded in 2002. His circle of competence is deep value, cyclicals and deceptively cheap compounders amongst the industrial and consumer discretionary sectors.

Previously, Simon was a management consultant for more than a decade, including at Mercer Management Consulting. Simon has an MA in Engineering from Cambridge University and an MBA from London Business School.

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