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Central European Media Rises on Ad Sales Outlook: Prague Mover

Central European Media Enterprises Ltd. rose the most in a week in Czech trading after Wood & Co. started the stock with a buy rating on bets a rebound in advertising will help the broadcaster swing to profit next year.

The company partly owned by Time Warner Inc. climbed 4 percent, the most since Aug. 13, to 76 koruna by the close in Prague. The stock was the best performer in the benchmark PX equity index, which dropped 1.6 percent. The U.S.-traded shares jumped 7 percent to $4.075 at 10:56 a.m. in New York.

The operator known as CME has increased advertising prices and fees in most of its markets this year to reverse a trend of declining revenue from TV ad spending. Wood expects the company’s 2013 net loss to narrow to $63 million from $536 million a year earlier and CME will probably post $19 million in profit next year, according to an e-mailed note dated today.

“CME’s shares offer extremely leveraged exposure to the TV ad-market recovery in eastern Europe,” analysts Tibor Bokor and Ondrej Cabejsek at Prague-based Wood said in the report. “We estimate that 2014 will be the first year of growth after five years of advertising market decline in Europe.”

CME, which operates in the Czech Republic and five other eastern European states and is registered in Bermuda, posted a second-quarter loss of $41.1 million last month after clients in its main market resisted higher advertisement fees and the company pursued a debt buyback.

The broadcaster will use its “dominant audience share” in emerging Europe to bring back advertisers as an economic recovery in the region supports the sector, Bokor and Cabejsek said. They initiated CME with a 12-month price estimate of $7, 84 percent above yesterday’s closing price in New York.

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