Companies: BMY    CLL    ERT    FUTR    RDF    SHDP   

The media professionals at Altium Securities expect 2007 will see a continuation of last year’s trends of high levels of M&A activity and share price performance riding on industry-wide structural issues. This should create a ‘challenging environment for investors’ in which stock picking will come to the fore.

With that in mind, Altium advocates buying the owner of Basil Brush and Postman Pat, Entertainment Rights, which in January bought US children’s content owner Classic Media for $305 million (£155 million), adding such titles as Casper the Friendly Ghost, Lassie and Frosty the Snowman. This acquisition represented a ‘step-change’ for the UK company and the broker predicts a 71 per cent growth in earnings between 2005 and 2008 as a result, setting a price target of 54p.

Receiving even stronger backing is marketing services company Cello, a strong buy on recent share price weakness and its sturdy organic and acquisitive growth prospects, according to analyst Roddy Davidson. ‘The fact that many of its underlying operations are at a relatively early stage of their corporate development should prove highly beneficial, and we expect further impetus as previously acquired companies develop complementary operating platforms,’ he says.

The broker’s two chief negative stances are on Future and Bloomsbury Publishing. Against the backdrop of a ‘challenging’ market, consumer magazine publisher Future is deemed worth selling, as the price has got ‘ahead of itself’. And following a profit warning in December, book publisher Bloomsbury is slapped with a reduce tag due to the prospect of ‘unexciting medium-term earnings progress’, despite the potential spike from the new Harry Potter hardback.

Finally, passing comment on the ‘disappointing’ recent licence fee settlement from the BBC perspective, the broker does ‘not believe it undermines the investment case for well-established independent content production and ownership companies’ and retains its hold recommendations on RDF Media and Shed Productions.