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.

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An Updated Sum Of The Parts Valuation of Vivendi, Buying More Shares, Also a Brief Update on $CMT

While I am waiting for Dole’s next quarterly report to come out so I can finish my updated valuations and analysis of it, I have been researching some new companies and reanalyzing Vivendi and Core Molding Technologies since new information has come out about both.

After revaluing CMT with updated quarterly numbers it is still selling at a very good discount to my estimate of intrinsic value and I may buy more shares at any time after hearing specifics from CMT management about how Navistar’s problems are affecting it.

When I did my first sum of the parts valuation of Vivendi in July I had no information or very limited information about the values of its subsidiaries: GVT, Canal+, SFR, and Universal Music Group.  Since that time some information has come out about three of those, which has helped clarify the sum of the parts valuation quite a bit.

Vivendi is still seeking to spin off or sell some of the below companies to unlock value in its shares.

• An estimated sale price for SFR if Vivendi were to find a buyer is at 15 billion Euros
• Canal+ 20% estimated price that Vivendi does not own has a conservative estimated IPO price of $900 million.  Vivendi owns 80% of Canal+ meaning conservatively its estimated stake in Canal+ has a price of $3.6 billion.
• Vivendi is seeking 5.5 billion Euros for its 53% stake in Maroc Telecom.  Vivendi’s current 53% stake market price in Maroc Telecom is worth 4.72 billion Euros or $6.02 billion.
• Vivendi owns 60% of Activision Blizzard which is currently worth $7.44 billion at market.
• Vivendi is seeking at minimum 7 billion Euros for GVT.
• I still cannot find any reasonable estimate of value for Universal Music Group so at this point I will still leave this out of my estimates.

Adding all of the above together and converting everything to US Dollars gets us to a total estimated price of $46.13 billion.  Vivendi’s numbers of shares are still 1.242 billion.

• $46.13/1.242=$37.14 per share.

For the sake of being conservative and assuming that Vivendi will not be able to get the prices it wants from some sales or spin offs of some of the subsidiaries, which is already the case in a couple instances, I will knock off $7.14 from the per share estimate which gets us to an extremely conservative, probably too conservative, value of Vivendi at $30 per share, which still does not even include UMG or Vivendi’s cash and debt.

Here is my original Vivendi article from June for a comparison of the values then and now.

The $30 per share price is an absolute worst case estimate of value.  Today I bought more shares at $19.22 per share for all portfolios that I manage, meaning there is still a 36% margin of safety to my absolute lowest case value of Vivendi, and an almost 50% discount to my more reasonable estimate of value.  Neither of the two estimates even take into account Universal Music Group, Vivendi’s cash, or debt.

Vivendi now makes up about 25% of my personal portfolio.

China news, More Vivendi News and a look at the overall gaming industry.

Found some interesting and disconcerting news on China this weekend.

The first article, here,  talks about a potential “Hard Landing” for the Chinese economy and some of the reasons.  It also has other links throughout the page discussing China and some of their current and future problems in their economy.  Very interesting reads.

The second article is to me the more important one because I found something very disturbing in it.  In general it talks about how China’s PMI keeps dropping and how it looks like the Chinese economy keeps slowing.  PMI is a measure of the level of manufacturing and is further explained here.

About half way through the Fox Business article is the disturbing part though:

To shore up growth, Beijing lowered interest rates once and reduced banks’ reserve requirement ratio [RRR] twice this year.

Traders said on Friday they anticipate the central bank to lower banks’ RRR soon to ease a recent liquidity squeeze, triggered by regulatory requirements and a large initial public offer.

Isn’t that how the economic bubble and housing crisis started here in the US by lowering interest rates and reserve requirements for banks?  The US government and Federal Reserve started allowing banks to lower their reserve requirements, meaning they had less cash on hand, in order to encourage more lending, leading to more speculation, and the eventual crash.  Not a good sign in my opinion.

More Vivendi and Activision Blizzard news.  Also an overview of the overall video game industry:

The first article here, talks about ATVI and in his opinion that the video game industry is in decline.

The second article is a more in depth discussion of the overall video game industry.

I would also encourage everyone to read the comments sections of both articles as there is a good discussion, and opposing views to what the article states.

The third article is a different perspective on Vivendi from another contributor on Seeking Alpha.

If anyone has thoughts on any of the above articles please feel free to post.  Enjoy.

More news on Vivendi.

This article talks about Universal Music Group and how at this time Vivendi is not going to sell or spin off UMG.  Also talks about UMG and their buyout of EMI.

The article also goes over ATVI a bit, and talks about Vivendi’s conglomerate discount again.

http://www.bloomberg.com/news/2012-06-30/vivendi-s-fourtou-goes-back-to-future-with-ouster-of-levy.html

Latest article published.

My latest article just got published on seekingalpha.com and can be seen here.