The ETF MDA (Lyxor) replicates the Stoxx Europe 600 Media (SXRR) index, which is composed of the main European media stocks.
This index is rather narrow since it has only 26 holdings. It is essentially composed of market capitalizations between €5 and 30 bn. What is most interesting is the wide variety of sub-sectors: WPP and Publicis are advertisers in full digital transformation, ITV or SKY are broadcasters, therefore content distributors who increasingly want to ensure their own production to face US giants like Netflix. This index also includes companies such as RELX Group (Reed Elsevier) or Wolters Kluwer, which are publishers of specialized information and content (scientific, legal, etc.). The common point to all these sectors is that they are currently experiencing digital transformation to face US web giants.
The current multiples are relatively reasonable at about 16x the 2017 EPS with expected net profit increases of about 10% and while for many players (including WPP and Publicis), 2016 will remain as a transition year. It should be noted that more than half of the index is represented by English companies, which adds an additional risk to the currency as well as to the UK specific risk in the case of "hard Brexit".
The volatility of the sector is not particularly high, the media being considered by the market as a growth sector (reinforced with the digital), more than a cyclical sector that it is also. The margins and cash flows can be significant, and the growth is also made by acquisitions, which makes the media an attractive sector for the long term. The digital transition has been accelerated for a large number of players, bringing together the business models of large IT services companies such as Accenture or Cap Gemini or US technology giants such as Netflix for certain broadcasters (eg ITV). Medium-term prospects are attractive.
The expenses of this ETF are reasonable at 0.3%. Assets Under Management : 7 M€.
The index declined by 5.9% in 2016 and has been stable since the beginning of 2017 after releasing all its gains in the last 15 days (-6%) due to several analyst downgrades, and the fear of weaker growth ahead due to a higher competitive landscape while the market moves definitely to the mobile.
