Author Topic: VIAB - Viacom  (Read 40398 times)

Grey512

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Re: VIAB - Viacom
« Reply #80 on: August 12, 2015, 10:22:41 AM »
Down to $16bn market cap?  This is a company that should have $3bn in free cash flow this year.  I get the concerns about long term but the knee jerk reaction by the market is excessive.

LTM cash from ops: $2.3b
LTM interest expense: $650m
LTM capex & acquisitions: $850m
LTM FCF (crude way to calculate, I know): $2.2b
Current EV: $30b.

If the company does $3b FCF this year like you said, that's a 10% yield. And if the company does not do $3b FCF this year but $2.2b, then that's a 7% yield. I guess the market is pricing this as a 0% top-line growth kind of company, which I agree is harsh. I guess I just don't fully agree with you that this is a steal. It's... alright, but it's not a steal to me. Maybe it's looking good in the current environment, but I'm somewhat convinced that over time (say 5-10 years) all companies of a certain size retrade to a doubledigit FCF yield. In other words, getting in at current levels, it's tough to bank on a "multiple expansion" kind of uplift. We're only left deleveraging and EBITDA growth as our return levers.
« Last Edit: August 12, 2015, 10:27:30 AM by Grey512 »


dwy000

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Re: VIAB - Viacom
« Reply #81 on: August 12, 2015, 11:12:12 AM »
Down to $16bn market cap?  This is a company that should have $3bn in free cash flow this year.  I get the concerns about long term but the knee jerk reaction by the market is excessive.

LTM cash from ops: $2.3b
LTM interest expense: $650m
LTM capex & acquisitions: $850m
LTM FCF (crude way to calculate, I know): $2.2b
Current EV: $30b.

If the company does $3b FCF this year like you said, that's a 10% yield. And if the company does not do $3b FCF this year but $2.2b, then that's a 7% yield. I guess the market is pricing this as a 0% top-line growth kind of company, which I agree is harsh. I guess I just don't fully agree with you that this is a steal. It's... alright, but it's not a steal to me. Maybe it's looking good in the current environment, but I'm somewhat convinced that over time (say 5-10 years) all companies of a certain size retrade to a doubledigit FCF yield. In other words, getting in at current levels, it's tough to bank on a "multiple expansion" kind of uplift. We're only left deleveraging and EBITDA growth as our return levers.

I think you're double counting the debt.  FCF is after debt service costs so it's appropriate to compare that to market cap (as opposed to EV).  The $2.2bn is a 12% FCF yield on today's price.  The company was the one to guide to $3bn for 2015 cash flow.  At that level it's a 16.4% FCF yield.

Obviously pre-interest cash flow yield vs. EV is lower but their debt is pretty much locked in at fairly attractive rates for a long time.

Grey512

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Re: VIAB - Viacom
« Reply #82 on: August 12, 2015, 02:13:07 PM »
my calculation is CFO + interest expense - (capex + acquisitions) = 2.2b + 0.65b - 0.85b=2b (sorry I fudged the 2.1b number earlier). Thats FCFF (cash flow to the Firm) approximation. FCFF is relevant to EV. FCFF is what I tend to prefer. Its just faster to calculate, you just need 3 lines from the cash flows statement and 1 line from P&L (interest expense) and takes 5 secs.

So I guess I am not sure what you mean, apologies. The EV number (about $30b) is straight from consensus estimate.

That said if Viacom do get to $3b FCFF, that to me is still a 10% "current" FCFF/EV yield, which is fine and solid, but not a broad daylight steal. from this "current" 10% unlevered return I can get to levered (equity) return by arbitrarily piling on an extra 2% for say GDP or top-line growth and another 4% say for leverage, gets me to a possible 16% long-term annualised estimated return from buying stock in Viacom today. Not bad.. but frankly I would like a bit of a juicier return to take on the knock-on "cord cutting" / NFLX-related long-term risk. Anecdote: I have a kid and because we subscribe to Netflix, we have less need to seek out access to Nickelodeon.

BTW now that I think about I do see how they can get yo $3b FCFF..

Sorry for rambling, I just really enjoy thinking about this stuff..
« Last Edit: August 12, 2015, 02:38:39 PM by Grey512 »

dwy000

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Re: VIAB - Viacom
« Reply #83 on: August 12, 2015, 08:19:59 PM »
my calculation is CFO + interest expense - (capex + acquisitions) = 2.2b + 0.65b - 0.85b=2b (sorry I fudged the 2.1b number earlier). Thats FCFF (cash flow to the Firm) approximation. FCFF is relevant to EV. FCFF is what I tend to prefer. Its just faster to calculate, you just need 3 lines from the cash flows statement and 1 line from P&L (interest expense) and takes 5 secs.

So I guess I am not sure what you mean, apologies. The EV number (about $30b) is straight from consensus estimate.

That said if Viacom do get to $3b FCFF, that to me is still a 10% "current" FCFF/EV yield, which is fine and solid, but not a broad daylight steal. from this "current" 10% unlevered return I can get to levered (equity) return by arbitrarily piling on an extra 2% for say GDP or top-line growth and another 4% say for leverage, gets me to a possible 16% long-term annualised estimated return from buying stock in Viacom today. Not bad.. but frankly I would like a bit of a juicier return to take on the knock-on "cord cutting" / NFLX-related long-term risk. Anecdote: I have a kid and because we subscribe to Netflix, we have less need to seek out access to Nickelodeon.

BTW now that I think about I do see how they can get yo $3b FCFF..

Sorry for rambling, I just really enjoy thinking about this stuff..

Ah, okay , I get your calculation.  That makes sense. 

Maybe I'm a little less worried about the cord cutting concern.  Cable companies haven't been losing subs at anywhere near the rates the headlines would imply (certainly at rates well below the price increases agreed in the long term carriage contracts)- and many of the OTT start ups will be subscribing for content from the Viacoms and discovery's of the world.

Either way, a 16%+ return is pretty substantial for a company with the visibility they have for the next few years.  Even with the recent market drop I'm having trouble finding things with a return like that without substantially more hair on it.

LowIQinvestor

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Re: VIAB - Viacom
« Reply #84 on: October 02, 2015, 07:40:20 AM »
**Gabelli Funds Shows 3.74% Stake in Viacom, Gamco Asset Management Shows 6.07%; Both Previously Showed 0.7%

Also buyback is re-starting now ( Oct).

Maybe VIAB is worth more than 7 or 8 times 2015 earnings ?

Extremely long VIAB

Gray Fox

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Re: VIAB - Viacom
« Reply #85 on: October 02, 2015, 08:13:23 AM »
**Gabelli Funds Shows 3.74% Stake in Viacom, Gamco Asset Management Shows 6.07%; Both Previously Showed 0.7%

Also buyback is re-starting now ( Oct).

Maybe VIAB is worth more than 7 or 8 times 2015 earnings ?

Extremely long VIAB

Gabelli's ownership has zero affect on what the company is worth.

LowIQinvestor

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Re: VIAB - Viacom
« Reply #86 on: October 02, 2015, 08:41:50 AM »
Quote
Gabelli's ownership has zero affect on what the company is worth.

I concur.

Have a good weekend!

LowIQinvestor

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Re: VIAB - Viacom
« Reply #87 on: October 08, 2015, 07:25:51 AM »

LowIQinvestor

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Re: VIAB - Viacom
« Reply #88 on: November 04, 2015, 09:17:04 AM »
VIAB @ 8 PE today on TWX guidance !?

Grey512

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Re: VIAB - Viacom
« Reply #89 on: November 04, 2015, 10:35:53 AM »
Agreed. A little too cheap, IMO. Considering a buy.