Vivendi Update

Vivendi CEO says that its future lies in its content and media businesses and that it may announce the sale of its telecom units at its next annual shareholder meeting in April.

Also of note from this article is that the CEO estimates SFR to be worth 20 billion Euros by itself, or approximately $26.22 billion.  That estimate is 5 billion Euros more than the 15 billion Euros I estimated SFR to be worth in my latest sum of the parts valuation on Vivendi.

I think the CEO’s estimate of what SFR is worth is a bit optimistic, but if true that means that with Vivendi’s current market cap at $28.2 billion that the market is currently recognizing that Vivendi’s other assets are only worth a combined $2 billion.  We know this cannot be true because Vivendi’s 60% stake in $ATVI is currently worth $7.44 billion just by itself.  If SFR is really worth 20 billion Euros that means that the market is massively undervaluing Vivendi as a whole.

If I were to apply the CEO’s estimate of SFR’s value to my sum of the parts valuation that brings the value per share of Vivendi up to $42.45 per share, or $28.66 per share after subtracting debt and still not including UMG.

Vivendi’s new CEO may think that SFR is worth 20 billion Euros and as a shareholder I hope they are able to sell it for that price, but I am not counting on it, and I still think Vivendi is undervalued.

Advertisements

More Activision Blizzard and Vivendi news, and a Warning from the CFA Institute

More Vivendi and Activision Blizzard news

I thought this article was interesting, mainly because I have never thought of this possibility.  The article talks about how Activision Blizzard could buy its own shares back from Vivendi, instead of Vivendi spinning off or selling ATVI to a third-party.  It speculates that because Vivendi is having trouble selling Activision, and since ATVI has about $3 billion in cash and almost no debt that they could finance the rest of the transaction.

To me this makes zero sense from both companies perspectives.

  • For Vivendi they would most likely not get the premium on the shares that they are looking for, meaning they would not be able to pay down their debt to the levels they would want.
  • For Activision this would mean they would lower their cash hoard, and have to leverage up their balance sheet just to make the transaction happen.  Seems like a loser to me on all accounts.

I am interested to see if anyone has any differing thoughts on this possibility.

Here is an overview of the gaming industry and the profitability of each company.

Three things surprised me about this graphic: 1) That Gamestop is making as much money as they are.  2) That ATVI was behind Nintendo, Namco Bandai, Sega, and only slightly ahead of EA in terms of profits. 3) That Zynga is making over $1 billion in profits.  Most of their games are free to play on Facebook aren’t they?  I do not know much about Zynga, I have never played any of its games, and only heard of a couple of them, so if anyone else has information on them could you please let me know.

A Warning from the CFA Institute

This article talks about decision making errors that could be hurting your investment performance and talks about five active thinking strategies.  Some pretty interesting thoughts.

My next post will be a mini review of Valuation: Measuring and Managing the Value of Companies

Cove Street Capital and an article on Activision Blizzard that has an opposing view to mine

Cove Street Capital

I found this site on csinvesting’s site, yet again.  So far I have read through a few of the links that CS has posted from Cove Street Capital’s site and thought I would share this site with you.  I cannot vouch for the accuracy or quality of research done, since I have not researched the companies that he talks about, at least what little I have looked into so far.

However, I decided to put it up here because the way Cove Street thinks about the companies, the industry they are in, and how they outline their investment thesis is impressive, and could be something to learn from, an example is here.  I will continue to look through the site to see if I see anything else that stands out.

Activision Blizzard article

Here is a pretty good article about Activision Blizzard and their future prospects.    I do not really like how he mainly talks in generalities, but he does go over ATVI’s gaming properties very well and lays out a decent bull case for the company.  He also does not value the company.

I wanted to put this on the blog mainly because it is an opposite opinion that what I laid out in my article on Vivendi here.  It is always a good thing to seek out differing opinions than the ones you have.  Not only might you learn something, you might also see something in the analysis that you might have missed.

Hope you enjoy