Author Topic: LBTYA - Liberty Global  (Read 176533 times)

HalfMeasure

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Re: LBTYA - Liberty Global
« Reply #480 on: June 28, 2018, 09:26:20 AM »
Given the asset sale, how are you guys looking at LBTYA?


walkie518

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Re: LBTYA - Liberty Global
« Reply #481 on: June 28, 2018, 12:39:57 PM »
Bird's eye view: Liberty is selling 20% of its revenues (including the VodafoneZiggo JV) for net proceeds greater than 50% of its market cap.  Liberty is also keeping all cash flow from these businesses until closing...

The deal doesn't close for another year and since many investors have troubling thinking a few months ahead, a year might be an eternity. 

Lumping together in the Austria DT deal with the Vodafone one might be helpful for quick figures to see what's going

Liberty is selling a group of businesses that have grown sales from $3.36B in 2015 to $3.79B in 2017, or 4% sales growth per year on average. 

As a whole, Liberty has grown sales by only 2% per year (averaging 3 years and subtracting Netherlands)...clearly, the businesses being sold were a large part of the firms greater revenue growth.

The UK/Ireland business might be somewhat misunderstood, though rear-view mirror shows declining profitability and lower sales.  Belgium, on the other hand, has done very well.  Switzerland is subscale and possibly more of a problem maybe they figure it out or do a deal. 

Yes, as the analyst argues, sales are likely to decline. 

Taking this view is not constructive nor does it hold water because it doesn't take into account the broader context. 

Net proceeds from the Vodafone sale are expected to be roughly net proceeds of $12.7B USD (not including Austria). 

Austria is a TEV $2.2B deal.  I can't seem to find what net proceeds look like for this deal, but considering how little Austria contributes to the bottom-line, my guess is that piece of the business does not have cash flows that provide great coverage; that said, 10K seems to only show UPC debt w/o Austria broken out?  Does anyone have an actual number?

On the last call, Fries has indicated that should the stock be where it is today at closing, "every penny" will go to buybacks. 

At the end of Q1, Liberty bought back $480m of shares.  We'll see what the next Q looks like, but it's likely that the buyback was a similar figure since this year, the board has approved $2B of buyback. 

After Austria closes (this year), it would only make sense for Liberty to increase the buyback this year to match last year's? 

At $27/sh, Liberty Global trades at a $21.5B market cap...before the $12.7B of net proceeds (a large piece of which will likely be used for buyback should the stock remain depressed), Liberty will buy back roughly 8% of its market cap AND be earning money...

vince

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Re: LBTYA - Liberty Global
« Reply #482 on: June 28, 2018, 02:10:06 PM »
digging deeper might be best move over time?

an analyst came out saying the stock should trade at $26/sh because the UK revenues will no longer grow

It's very possible that revenues do not continue to grow after the Vodafone deal, but from here, the company's free cash flow should increase relative to revenues since most if not all of the pieces are in place

Liberty is also buying an Irish cable co, which is subscale to its current operations

That said, I've seen managers dig into the stock when it's cheap to see if fall another 20%...
pray to god it falls another 20 percent and stays there

Spekulatius

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Re: LBTYA - Liberty Global
« Reply #483 on: August 10, 2018, 07:32:20 AM »
Last quarter results were crappy. Again, lack of FCF, slow growth, more share buybacks. Hovering around 5x EBITDA debt, which is high, given the lack of FCF. Why invest in LBTYA when you can buy CHTR for a similar valuation and CMCSA even cheaper?
To be a realist, one has to believe in miracles.

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #484 on: August 11, 2018, 12:46:49 AM »
Would one be wrong in thinking that European regulators have resulted in higher percentage of capital spending and lower potential or cap on consumer broadband costs ? After this sale , global is mostly UK and a few western European small countries and poland.
I'm also seeing Gates investment vehicle cascade owns 5 percent of this. I think it's like a piggyback. It is unlikely to go much lower but it also may not go up dramatically either until more time passed , new deals or buybacks materialize.
« Last Edit: August 11, 2018, 12:59:42 AM by scorpioncapital »

thefatbaboon

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Re: LBTYA - Liberty Global
« Reply #485 on: August 11, 2018, 01:30:55 AM »
The whole Global thesis revolves on how you interpret the capex in the UK.  They are spending all their cash flow building out there, adding 4%-5% households for the last few years and intend to do so for the next 5. Meanwhile they are getting negligible arpu growth and homes past are only 38% penetrated...and what they do manage to build out doesnt immediately add that much to rgu growth as it takes time to ramp marketing and wait for the involuntary churn to favor the gravity of a superior product. 

I feel the jury is still out, there is no damning evidence in the numbers that disprove the liberty management thesis. In 5 years time  Project lightening might have increased homes passed 30% to 17m homes, gotten speeds up to 1GB, all at a time when 5G and IOT and AR/VR makes the dense network and high speeds very desirable to consumers allowing penetration to climb toward 45%-50%.  That could easily mean 60% RGU growth compared to today with capex needs collapsing, and thats without without any arpu/pricing. Thats a lot of fcf.

Its worth noting though for dollar investors that global will be almost totally exposed to sterling.

vince

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Re: LBTYA - Liberty Global
« Reply #486 on: August 11, 2018, 10:18:46 AM »
Last quarter results were crappy. Again, lack of FCF, slow growth, more share buybacks. Hovering around 5x EBITDA debt, which is high, given the lack of FCF. Why invest in LBTYA when you can buy CHTR for a similar valuation and CMCSA even cheaper?

Spek, can you please show how lbtya is more expensive(pro forma for asset sales) than chtr or cmcsa?

cameronfen

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Re: LBTYA - Liberty Global
« Reply #487 on: August 11, 2018, 01:31:25 PM »
Last quarter results were crappy. Again, lack of FCF, slow growth, more share buybacks. Hovering around 5x EBITDA debt, which is high, given the lack of FCF. Why invest in LBTYA when you can buy CHTR for a similar valuation and CMCSA even cheaper?

Spek, can you please show how lbtya is more expensive(pro forma for asset sales) than chtr or cmcsa?

I can't speak for spek but cmcsa is trading at something like 8x EV EBITDA which is cheaper than the 10x for CHTR and LBTYA.  The benefit of owning charter is that earnings are set to increase a lot as they integrate there acquisitions (and also pivot away from video). 

Spekulatius

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Re: LBTYA - Liberty Global
« Reply #488 on: August 12, 2018, 06:07:18 AM »
Last quarter results were crappy. Again, lack of FCF, slow growth, more share buybacks. Hovering around 5x EBITDA debt, which is high, given the lack of FCF. Why invest in LBTYA when you can buy CHTR for a similar valuation and CMCSA even cheaper?

Spek, can you please show how lbtya is more expensive(pro forma for asset sales) than chtr or cmcsa?

Yes, thatís how I see it. CMCSA (albeit not totally comparable) is cheaper than LBTYA and CHTRís valuation is about the same, yet  CHTR has better organic growth and more importantly much lower Capex and higher FCF for the next few years probably.

Europe has more competition from the telecom operators, which brings returns down, IMO.

I can't speak for spek but cmcsa is trading at something like 8x EV EBITDA which is cheaper than the 10x for CHTR and LBTYA.  The benefit of owning charter is that earnings are set to increase a lot as they integrate there acquisitions (and also pivot away from video).
To be a realist, one has to believe in miracles.

cmlber

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Re: LBTYA - Liberty Global
« Reply #489 on: August 12, 2018, 02:32:46 PM »
Last quarter results were crappy. Again, lack of FCF, slow growth, more share buybacks. Hovering around 5x EBITDA debt, which is high, given the lack of FCF. Why invest in LBTYA when you can buy CHTR for a similar valuation and CMCSA even cheaper?

Spek, can you please show how lbtya is more expensive(pro forma for asset sales) than chtr or cmcsa?

Yes, thatís how I see it. CMCSA (albeit not totally comparable) is cheaper than LBTYA and CHTRís valuation is about the same, yet  CHTR has better organic growth and more importantly much lower Capex and higher FCF for the next few years probably.

Europe has more competition from the telecom operators, which brings returns down, IMO.

I can't speak for spek but cmcsa is trading at something like 8x EV EBITDA which is cheaper than the 10x for CHTR and LBTYA.  The benefit of owning charter is that earnings are set to increase a lot as they integrate there acquisitions (and also pivot away from video).

LBTYA is not trading at 10x EBITDA.  Not sure what numbers you're looking at, but you may be ignoring the look-through EBITDA of the Netherlands JV and not valuing the public equity stakes.  It's <8x EV/EBITDA on an aggregate basis, but they are selling 1/4 of the business at 11x, so the leftover (Virgin Media) is much cheaper. They only have 37% broadband penetration in the UK (compare to CHTR/CMCSA at 45-50%) and price points are lower than BT for substantially faster speeds.  And they don't have to defend the video contribution from OTT.

Another way to look at it is you're paying $20.5Bn for the equity today.  They have $1.2Bn left on the buyback + $12.2Bn that can be used to buyback stock if/when the Germany deal closes.  They also own a stake in Telenet which is publicly traded.

So you can think of it as getting the equity in UPC Switzerland ($1Bn OCF) for free and 50% of Vodafone/Ziggo (distributing $400MM/year) for free and paying $3.5Bn for the equity in Virgin Media, or a ~$20Bn EV for Virgin Media, which was purchased 5 years ago for a $23.3Bn EV.  Even adjusted for the depreciation of the pound OCF at Virgin is 10% higher since then, the footprint has expanded, and the speed is more important for consumers.