Media & Multimedia
Vivendi Universal's Jump
Auteur : smartmoney
Du : 01/11/2005
WOW. THAT'S ONE way to describe the 200% jump in Vivendi Universal (V) shares since the summer of 2002. Under the direction of chairman Jean-Rene Fourtou and more recently chief executive Jean-Bernard Levy, the French telecom and media giant has st
The duo has streamlined the sprawl and excesses created in the name of "synergies" by ousted predecessor Jean-Marie Messier, paid down debt and reinvigorated and refocused the company around its key components — SFR, France's second-largest wireless telecommunications company; Universal Music Group, the largest music company in the world; the Canal + Group cable television provider and filmmaker and distributor; and VU Games, a video-games publisher that has hit the jackpot with its breakthrough World of Warcraft online subscriber role-playing video game, also known as WoW. Wow, indeed.
What's even better is the likelihood of further stock gains as Vivendi moves beyond restructuring and recapitalizing and concentrates on building core businesses.
"It's a different story," says CEO Levy. "It's a very, very exciting story. It was exciting to manage through this difficult period and it is another kind of excitement now to have goals focusing on growth and new customer experience devoted to entertainment-based services. The numbers are really amazing, and we see there is really an explosion of multimedia services and broadband services. There's an explosion of music usage, an explosion of online games usage, and text and video messaging and so forth and we are right in the heart of that."
Vivendi's ADRs still are a bargain at just under six times 2006 cash flow compared with a multiple of around nine-to-11 times for other media companies. (Each ADR represents one common share.) Even battered Viacom (VIA.B) trades at eight times cash flow. Potential catalysts for further gains include moves such as Vodafone (VOD) eventually purchasing Vivendi's stake in SFR; the monetization of Vivendi's 18.5% stake in NBC Universal; , and the possible merger of its Canal + satellite operations with competitor Lagardere's TPS satellite operations.
"We're still fans," says Andrew Wallach, portfolio manager at Manhattan's Cumberland Associates, who initially bought a stake in the low teens. "They've executed well and [the stock] is cheap on absolute multiples and cheap versus other media companies. It's a more mature story than when we first bought it, but every time I look at it I see good odds of 20% upside."
So does Larry Haverty, media specialist and portfolio manager at Gabelli Global Multimedia Trust (GGT), where Vivendi is one of the top 10 holdings. Haverty expects the shares to move higher in the next six-to-nine months, as investors become more aware of the enormous cash flow generated by World of Warcraft. He also enthuses about Universal Music Group and its ability to increase revenues at a time when the rest of the industry saw declines. Performance in the SFR mobile phone business is strong and Vivendi is seeing great success in privatizing developing countries' telecommunications assets. All in all, analysts at Gabelli put the private-market value of Vivendi at about €36, or about $43 per ADR.
The duo has streamlined the sprawl and excesses created in the name of "synergies" by ousted predecessor Jean-Marie Messier, paid down debt and reinvigorated and refocused the company around its key components — SFR, France's second-largest wireless telecommunications company; Universal Music Group, the largest music company in the world; the Canal + Group cable television provider and filmmaker and distributor; and VU Games, a video-games publisher that has hit the jackpot with its breakthrough World of Warcraft online subscriber role-playing video game, also known as WoW. Wow, indeed.
What's even better is the likelihood of further stock gains as Vivendi moves beyond restructuring and recapitalizing and concentrates on building core businesses.
"It's a different story," says CEO Levy. "It's a very, very exciting story. It was exciting to manage through this difficult period and it is another kind of excitement now to have goals focusing on growth and new customer experience devoted to entertainment-based services. The numbers are really amazing, and we see there is really an explosion of multimedia services and broadband services. There's an explosion of music usage, an explosion of online games usage, and text and video messaging and so forth and we are right in the heart of that."
Vivendi's ADRs still are a bargain at just under six times 2006 cash flow compared with a multiple of around nine-to-11 times for other media companies. (Each ADR represents one common share.) Even battered Viacom (VIA.B) trades at eight times cash flow. Potential catalysts for further gains include moves such as Vodafone (VOD) eventually purchasing Vivendi's stake in SFR; the monetization of Vivendi's 18.5% stake in NBC Universal; , and the possible merger of its Canal + satellite operations with competitor Lagardere's TPS satellite operations.
"We're still fans," says Andrew Wallach, portfolio manager at Manhattan's Cumberland Associates, who initially bought a stake in the low teens. "They've executed well and [the stock] is cheap on absolute multiples and cheap versus other media companies. It's a more mature story than when we first bought it, but every time I look at it I see good odds of 20% upside."
So does Larry Haverty, media specialist and portfolio manager at Gabelli Global Multimedia Trust (GGT), where Vivendi is one of the top 10 holdings. Haverty expects the shares to move higher in the next six-to-nine months, as investors become more aware of the enormous cash flow generated by World of Warcraft. He also enthuses about Universal Music Group and its ability to increase revenues at a time when the rest of the industry saw declines. Performance in the SFR mobile phone business is strong and Vivendi is seeing great success in privatizing developing countries' telecommunications assets. All in all, analysts at Gabelli put the private-market value of Vivendi at about €36, or about $43 per ADR.