Bid spotlight on HTV

HTV, the ITV licence holder for Wales, has delivered another set of impressive results, proving that even small television companies can generate handsome profits for shareholders. But the abilities of the management team of Chris Rowlands, Louis Sherwood and Ted George will continue to be overshadowed by takeover talk, as the market continues to place a premium on the shares of the few remaining smaller ITV companies left without a big brother.

Certainly the fundamentals look attractive enough. Pre-tax profits were ahead 66 per cent to just over pounds 12m, with some of that coming from the company's imaginative foray into the acquisition of programme rights and independent production. Unlike some of its ITV brethren, HTV has actually lined up some customers from outside the Channel 3 market - including big names such as Disney, Sky and the Discovery Channel.

Earnings could improve further if the Government allows ITV licence holders to renegotiate their cash payments to the Treasury. HTV paid more than pounds 20m last year and is locked in to high payments after over-bidding in the last franchise round in 1992.

It is easy to see why Michael Green's Carlton, the market's favourite to buy HTV, might be attracted. Carlton wants to build its distribution capabilities and HTV's First Independent arm would give a boost to existing operations. Moreover, Carlton is already a supplier to Disney in the video reproduction market, and could further cement its relations through HTV's own Disney connection.

Scottish TV is another potential predator, with a 20 per cent holding. But Mr Rowlands and his team is far more likely to agree to an offer from Carlton than to climb back into bed with STV's 20 per cent owner, Flextech - the mercurial US-backed media company which dumped HTV in favour of Scottish in a controversial deal last year.

Take out the takeover hopes, and HTV looks over-priced. On the basis of current-year forecasts of pounds 15.5m, the shares are trading on a forward multiple of 32. Fully valued, unless Carlton swoops