This is my first post on CoB. Charter is intriguing, and I've just started trying to understand it to get a better handle on what LMCA pre-spin is worth. Here is my stab at valuing Charter pro-forma for the Comcast transaction. Welcome your thoughts / improvements:
2014 Charter Enterprise Value
+ 5.4m video subscribers = $5.7b revenue (+1.4m acquired)
+ 5.1m internet subscribers = $2.5b revenue
+ 2.5m voice subscribers = $0.7b revenue
+ 0.6m commercial subscribers = $0.9b revenue
+ 2.5m SpinCo video managed subscribers = $0.1b revenue (4.25% on revenue of SpinCo subscribers)
+ Other revenue = $0.5b
= $10.5b total revenue
x 36.0% Adj. EBITDA margin (historical 35%-37%)
= $3.8b Adj. EBITDA
x 9.5 EBITDA multiple (accounts for growth)
= $36.1b enterprise value
+ 33% stake in SpinCo = $2.1b equity value
- $21.8b debt (5.7x leverage)
= $16.4b equity value
/ 0.1b diluted shares
= $153 per share
Charter is currently trading around this value, suggesting upside of improved ARPU, margins and future capital allocation actions by Malone or Rutledge is not fully priced into the current price. Charter could potentially be worth 25% more is one assumes improved ARPU and margins as a result of economies of scale.
What do you think?