Author Topic: LBTYA - Liberty Global  (Read 277333 times)

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #880 on: February 14, 2020, 02:13:02 AM »
It's not so black and white. Take another stock seritage. They are in investment phase. Like 100 percent + capex . But that capex is going to earn say 12 percent.
To global...fcf is depressed to 1 billion for 2 reasons, no growth (some mild decline) and high capex. Focusing on the capex (because I think growth will return to uk ) what portion is maintenance versus growth capex? This is a crucial question to determine earnings power and return on Invested capital. I don't know how to separate maintenance vs growth capex in a case where it has been high for a very very long time. Any insights ? Is there a rule of thumb what percentage of their capex is maintenance or growth ?
It's an important question because earnings power may be 2 billion or 1.5 or more if they had a choice to not invest for growth.
The irony is they have no growth with all this investment so one could say it's 90 percent maintenance capex ?)
Is it like airline industry where all benefits go to consumer and it's 100 percent maintenance capex just to stand still (this happens in high inflation environment too btw)? Although in airline case there was passenger growth over the years, but also broadband data is growing at a rapid pace too.
« Last Edit: February 14, 2020, 02:19:10 AM by scorpioncapital »


skanjete

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Re: LBTYA - Liberty Global
« Reply #881 on: February 14, 2020, 07:06:17 AM »
The optics of their results aren't great.

On the other hand, the shares don't imply a great future eather. The stock is dirt cheap at this point.

LBTYA is clearly turning into a free cash flow machine.
They forecast an adjusted FCF of 1.000m$ for 2020. Add another 250m$ from VodafoneZiggo and we have 1.250m$ for the year.

So the stock is trading at less than 10x free cash flow, and that with reasonable debt ratio : 3,7x OCF.

The free cash flow will keep rising in the following years if their capital investments stay at the current level.
The adjusted free cash flow is being hurt a lot by the repayments of the vendor loans from past capital investments.
Capital investments are about 1$b lower than last year, so if the current level stays or lowers, the repayments of the vendor loans will diminish and so free cash flow will rise.

If you consider free cash flow, not adjusted for the vendor loans, then free cash flow was 1640m$ (ex. 40% telenet) and about 540m$ from VodafoneZiggo, so in total 2.180m$. For next year something like 2400-2500m$.
So if the lower capital investment trend is sustainable, which is quite possible, considering the evolution at Comcast and Charter, the adjusted free cash flow should trend to these numbers.

So if they can stabilise the business (let alone grow), the current price is really cheap for the future free cash flow that can be expected.

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #882 on: February 14, 2020, 07:10:10 AM »
Is there a reason their fcf guidance excludes cash from viggo or Telenet ? Are dividends received treated differently?

dwy000

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Re: LBTYA - Liberty Global
« Reply #883 on: February 14, 2020, 07:18:17 AM »
The results are typical Liberty Global.  A massive rat's nest of reporting metrics that you need a chain saw to hack through. Adjusted Operating Free Cash Flow Pro Forma Rebased Continuing Operations.  Its like they try as hard as they can to obfuscate the definition to come up with something positive.

The big takeaway for me was the whopping hit to organic numbers in the UK.  This is where Lightning is being built and they are putting most of the hopes for the future.  Yet customer numbers are dropping hard.

Malone needs to pull some magic out of a hat from an M&A perspective here before the customer and top line declines overwhelm the capital structure and they blow all the cash on the balance sheet.

I've given up on Fries. It's all bluster and talk without results.

skanjete

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Re: LBTYA - Liberty Global
« Reply #884 on: February 14, 2020, 07:24:06 AM »
I also don't understand why they don't mention VodafoneZiggo.
These results weren't bad at all (especially in consideration of their results in the past)

https://www.libertyglobal.com/wp-content/uploads/2020/02/VodafoneZiggo-Fixed-Income-Q4-2019-Release.pdf

skanjete

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Re: LBTYA - Liberty Global
« Reply #885 on: February 14, 2020, 07:25:52 AM »
Is there a reason their fcf guidance excludes cash from viggo or Telenet ? Are dividends received treated differently?

I think Telenet is included, but you have to take into account that they only have 60% of it.

VodafoneZiggo on the other hand is not included I think.

Spekulatius

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Re: LBTYA - Liberty Global
« Reply #886 on: February 14, 2020, 08:21:58 AM »
Stop loss triggered for me at $19.4. I rarely do stop losses, but feel like in this case it is warranted. I think it is the outlook that killed the stock. On a high level, Leveraged bets on a shrinking business just donít work. I think something like BERY has a better chance of working out.
Life is too short for cheap beer and wine.

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #887 on: February 14, 2020, 08:37:41 AM »
So I looked at the presentation slides. The fcf includes viggo and everything. So 1 billion for 2020 includes 50 percent viggo share. You can see this on pg 14 and 15 where for 2019, 770 fcf they show the 214m fcf share from viggo. No reason 2020 estimate would exclude it.


forest81

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Re: LBTYA - Liberty Global
« Reply #888 on: February 14, 2020, 08:40:19 AM »
Market Cap: 12.3b
Liquid Cash not required by business: 11b
Free Cash Flow per year minimum 1b? max 2b?

What does it matter too much about business degradation? If this was a private business would anybody sell for the market cap with the above? I know Mikes involved but cmon surely getting a bit silly here now? Maybe that's what Klarman sees. I see he has just added making it his biggest holding at 15% weighting of his portfolio.

Foreign Tuffett

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Re: LBTYA - Liberty Global
« Reply #889 on: February 14, 2020, 08:50:44 AM »
Stop loss triggered for me at $19.4. I rarely do stop losses, but feel like in this case it is warranted. I think it is the outlook that killed the stock. On a high level, Leveraged bets on a shrinking business just donít work. I think something like BERY has a better chance of working out.

General comments:
I couldn't agree more. I think a trap value investors frequently fall into is buying a leveraged businesses with organic revenue declines because they are "cheap" (the stock price has fallen, and TTM multiples look attractive). But are they really cheap if facing secular decline and/or the prospect of ongoing negative organic growth? In most cases no. They becomes less valuable with each passing year, with all of that decline hitting the equity.

This is the crux of why I have avoided AMC, GME, and KHC.

Liberty Global specific:
Agree with scorpioncapital on the Vodafone Ziggo issue. Even though LBTYA's ~50% stake isn't consolidated for reporting purposes, they are almost surely including its contribution to cash flow