Resilience from diversification

STV Group’s FY22 results and FY23E outlook, announced this morning, are in line with expectations. The resilient performance through the economic downturn (adjusted PBT +2% in FY22 and we forecast -10% for FY23E) underlines improving earnings quality from STV as the group continues its diversification from broadcast to streaming and studios, which together should generate over half of group profits for the first time in FY23E. We forecast good aggregate growth prospects for the broadening portfolio, at an undemanding valuation (8.9x ‘bottom of the cycle’ FY23E EPS with a 3.7% dividend yield).

Resilience from diversification

STV continues to be viewed as a mature broadcaster, yet it is transforming into a growing streaming and production business. We see continued double-digit growth prospects in these areas, together with a resilient broadcast business, and calculate five-year growth of 7% pa in revenue / 10% pa in operating profit for the group (FY23E-FY28E). Near-term economic pressures are factored into current EPS estimates, but should also drive eyeballs towards STV’s free AVOD service. Current valuation (7.6x FY23E EPS / 4.3% dividend yield) looks modest given the longer-term potential.

Towards streaming and content