James Murdoch bought ITV shares for 135p not too long ago. Now, you and I can pick them up for about half that.

Murdoch didn’t exactly buy them hoping them to make a quick buck. But now he has moved to Wapping, how does one of his papers cover the ITV story? Dan Sabbagh plays a pretty straight bat laying out the territory in the Times:

On fundamentals, ITV is expensive, even at these superficially bombed-out levels. The shares trade at 14 times earnings, a premium to European peers, and there are real worries that the high street advertisers on which ITV depends will start to rein in advertising as the economy tightens.

That has not happened yet, but economic sentiment is so poor that the worry is that dependence on retail advertising is a weakness waiting to be exposed, rather than a strength.

However, most quoted European broadcasters cannot be bought, because they are tied up with a strategic investor; ITV is the exception. For that reason alone, ITV, with its unique dominance of British commercial broadcasting remains a compelling investment.

So far so reasonable.

Yet for anybody willing to take a view, it is obvious that Sky’s shareholding has more value sold in a block to a would-be bidder. It is also clear that there is long-term strategic value in the stock. Television advertising may be difficult in 2008, but it will improve at some point.

A recovery in 2010 would be felt by investors from mid-2009. Meanwhile, ITV’s competitive environment is relatively benign. Neither the BBC nor Channel 4 is stealing viewers and 88 per cent of households have switched to multichannel. A bid may not be on the agenda yet, but it will come. ITV shares look attractive for the patient investor who believes that the economy will not collapse. Buy.

Hmmm.

Here is the FT’s take:

With its shares trading at half the 135p price BSkyB paid, ITV looks at first glance like low-hanging fruit…

Even at 67.9p, up 3.9p yesterday, ITV “is still more expensive than most other western TV companies”, one investment banker said yesterday. “You can’t raise the debt.”

With an equity value of £2.7bn and £668m of net debt at the end of December 2007, ITV is out of reach of any bidder that needs to tap tightened credit markets…

The bigger uncertainty, according to one executive who has examined ITV, remains the regulatory regime, which restricts how much ITV can charge its advertisers. Although the Office of Fair Trading is reviewing the contract rights renewal regime, any relief is unlikely to be felt until 2010..

Buy, hold or sell?

In the shorter term, ITV remains “on the cliff” of losing its investment grade rating, according to Christian Rauch, an analyst with Moody’s, which last month rated the group Baa3 with a negative outlook.

Should anything knock ITV’s bonds into junk territory, any prospective buyer may yet be able to strike at a lower price.