Markets: Citigroup persists with a buy rating on Ten

Citigroup’s Justin Diddams is not changing his buy recommendation on Ten Network Holdings even if the shares have dropped 8.5 per cent since Hamish McLennan became the TV station’s chief executive on April 8.

Ten’s announcement of a new affiliate deal this week with regional broadcaster Southern Cross improves the fee rate it gets from an affiliate to 35 per cent from 31 per cent, according to Diddams. The Citi analyst also says Ten’s deal with Southern Cross will inject $12 million of extra cash into Ten in its 2014 financial year.

But the Citi analyst says Ten’s ratings and revenue share are still lagging.

“We now expect only modest improvement in the 2014 financial year,” says Diddams. “For Ten the turnaround is a long and hard road with risk/reward skewed to the upside, albeit high on both.”

Diddam is one of four analysts who have a “buy” rating on the stock. Nine analysts have sells, according to Bloomberg data. Meanwhile, the group’s stock has fallen 34 per cent in 12 months. Yesterday, Ten shares fell half a cent, or 1.8 per cent, to 27 cents.