LBTYA - Liberty Global

[vince]

I get 12 billion or 15.50 a share in cash, 9-10 billion of value for Telenet and Ziggo or 12.50 per share and 10 times for remaining businesseswhich after debt gives us 15 billion or 20 dollars per share.  And to add a little more conservatism we have another 2 billion of buyback (mostly from cash flow) between end of 2nd qtr 2018 and sale of German asset. 

[AJDelphi]

I get 12 billion or 15.50 a share in cash, 9-10 billion of value for Telenet and Ziggo or 12.50 per share and 10 times for remaining businesseswhich after debt gives us 15 billion or 20 dollars per share.  And to add a little more conservatism we have another 2 billion of buyback (mostly from cash flow) between end of 2nd qtr 2018 and sale of German asset.

 

Why $12 billion? Maybe just being conservative but wanted to check.

 

Liberty is getting $1.054 billion from the sale of Austria. And $12.7 billion from the Vodafone deal. Probably some additional costs there from the transactions but Liberty also gets the free cash flow from those assests until they close. Which should be something, maybe a few hundred million. What I might be missing is paying down debt which would explain why my numbers are a bit different.

[vince]

My bad, u are more right than me AJ.  I just assumed maybe it was already spent on buybacks that would have brought the count to around 770 million shares as of July 31st (u can see the number on Liberty Global"s website under share info).  But after thinking about it a little I would probably just assume maybe another 1 billion of buybacks going forward. Either way, I believe your number is more accurate.

[vince]

Just to clarify, I think AJ's cash per share number is probably more accurate than mine but I prefer the numbers I use for the value of Telenet and Ziggo.  Either way this investment has a high probability of great returns over the next 2-3 years.  And it really supports my view that when you have smart shareholder oriented control owners (Mallone), your ultimate results can be dramatically improved (relative to what results would have been) even when the business is under pressure.  How many other mgmt's do u see selling assets at high private values and then taking proceeds to buyback their equity at low prices?  Or constantly shedding assets or acquiring them depending on scale and shifting advantages? 

[walkie518]

Horizon 4 to be rolled out in Switzerland first!  Likely a good idea given recent weakness there.

 

https://www.libertyglobal.com/wp-content/uploads/2018/09/Press-Release-Liberty-Global-launches-next-generation-entertainment-platform-Horizon-4.pdf

[ander]

Any thoughts on below?

 

Analyst Actions: Liberty Global's Class A Shares' Price Target Cut by Berenberg to $25 From $26, Sell Maintained

 

06:22 AM EDT, 10/11/2018 (MT Newswires) -- Liberty Global(LBTYA) received a slight reduction to the price target for its Class A shares from Berenberg as the firm expressed concerns about the communications-and-entertainment company's future cash flows.

 

Berenberg's new price target on Liberty Global's(LBTYA) Class A shares is $25 per share, down from $26. The shares closed Wednesday's session at $25.17. Berenberg kept its investment rating on the stock at sell.

 

In its note to clients, Berenberg said "The crux of our sell case is that, after its disposals, Liberty Global(LBTYA) will be left in markets where broadband penetration is near saturation, price increases are becoming harder to execute and increasing ultrafast broadband rollout by competitors will erode its historical network advantage."

 

In turn, the firm said it is forecasting revenue declines in three of Liberty Global's(LBTYA) four continuing major markets in 2018: Switzerland, Belgium and the Netherlands.

 

Still, Berenberg noted, it expects Liberty's Q3 results in early November to show accelerating growth versus Q2 and anticipates the company's management will "highlight its new Horizon 4 TV set-top box as a source of churn reduction and growth."

 

The firm pointed to an adjusted free-cash-flow split between discontinued and continuing operations as "the main disappointment at Q2." It noted the company's 2018 guidance calls for $1.6 billion in free cash flow as it retains cash flows until the sale of its German, Hungarian, Romanian and Czech operations, expected mid-2019.

 

"However, there will now be increased scrutiny on how this is split," Berenberg added, noting it is forecasting $500 million of adjusted free cash flow from continuing operations in 2018, with $1.1 billion to come from discontinued businesses.

 

 

[Shooter MacGavin]

Any thoughts on below?

 

Analyst Actions: Liberty Global's Class A Shares' Price Target Cut by Berenberg to $25 From $26, Sell Maintained

 

06:22 AM EDT, 10/11/2018 (MT Newswires) -- Liberty Global(LBTYA) received a slight reduction to the price target for its Class A shares from Berenberg as the firm expressed concerns about the communications-and-entertainment company's future cash flows.

 

Berenberg's new price target on Liberty Global's(LBTYA) Class A shares is $25 per share, down from $26. The shares closed Wednesday's session at $25.17. Berenberg kept its investment rating on the stock at sell.

 

In its note to clients, Berenberg said "The crux of our sell case is that, after its disposals, Liberty Global(LBTYA) will be left in markets where broadband penetration is near saturation, price increases are becoming harder to execute and increasing ultrafast broadband rollout by competitors will erode its historical network advantage."

 

In turn, the firm said it is forecasting revenue declines in three of Liberty Global's(LBTYA) four continuing major markets in 2018: Switzerland, Belgium and the Netherlands.

 

Still, Berenberg noted, it expects Liberty's Q3 results in early November to show accelerating growth versus Q2 and anticipates the company's management will "highlight its new Horizon 4 TV set-top box as a source of churn reduction and growth."

 

The firm pointed to an adjusted free-cash-flow split between discontinued and continuing operations as "the main disappointment at Q2." It noted the company's 2018 guidance calls for $1.6 billion in free cash flow as it retains cash flows until the sale of its German, Hungarian, Romanian and Czech operations, expected mid-2019.

 

"However, there will now be increased scrutiny on how this is split," Berenberg added, noting it is forecasting $500 million of adjusted free cash flow from continuing operations in 2018, with $1.1 billion to come from discontinued businesses.

 

yes, who's Berenberg and what is the point of cutting your price target by $1?  And why do you have a sell rating with a price target that is equal to the stock price?

[ander]

To clarify. My question was thoughts re: ongoing FCF post-divestiture?

[LightWhale]

 

why do you have a sell rating with a price target that is equal to the stock price?

 

because price targets are normally for 12 months from now. So 0% return is inferior to riskless 2.7% yield on US bonds for the same period.

[cameronfen]

To clarify. My question was thoughts re: ongoing FCF post-divestiture?

 

I dont know that much but my thoughts are the remain markets liberty global is in are developed and saturated.  I dont know of ultrafast broadband will be a problem in Europe.  DSL providers lose share to liberty but I think they are still quite profitable in Europe. Either way Europe is behind Asia and USA in 5g roll out (which is what I assume is pushing ultrafast broadband as things like FIOS were kind of abandoned by Verizon for example) so you can wait and see how it effects players in those markets.  That being said, the report could be exactly right and liberty shareholders could still make a lot of money if they buyback 50% of the stock.  Even if the company is not growing, if 50% of the company is returned in cash to shareholders (not to mention buyback), I think shareholders still do relatively well. 

[vince]

To clarify. My question was thoughts re: ongoing FCF post-divestiture?

 

Well he didnt adjust residual fcf for normal capex, and some margin enhancing activities in the pipeline.  Any which way you look at it, its cheap.  I dont understand how someone can say its worth 20 billion or less.  What, he cant count?

[maybe4less]

To clarify. My question was thoughts re: ongoing FCF post-divestiture?

 

Well he didnt adjust residual fcf for normal capex, and some margin enhancing activities in the pipeline.  Any which way you look at it, its cheap.  I dont understand how someone can say its worth 20 billion or less.  What, he cant count?

 

Also funny how it doesn't mention that the fourth market of Remainco, which is as big as the other 3 combined, is projecting strong growth.  I guess that doesn't fit the thesis, so best not to report it?

[ander]

Any thoughts on LBTYK impact if hard Brexit were to occur?

 

fyi - I'm a shareholder. I'm trying to think of ways where I could actually lose principal here.

[Spekulatius]

Any thoughts on LBTYK impact if hard Brexit were to occur?

 

fyi - I'm a shareholder. I'm trying to think of ways where I could actually lose principal here.

 

Brexit shouldn’t really have a major impact on its operations, since its run country by country. I think the main risk is they the GBP goes down when Britain tumbled into a recession and as someone noted, there is political risk with the Labor party veering left.

[no_free_lunch]

Do those who know this space have an opinion on AT&T?  It's going for something like 9x earnings with a 7% yield.  Kind of cheap unless it is going out of business.  Obviously a very real risk of a value trap but there is some safety via the dividend.

[Spekulatius]

Do those who know this space have an opinion on AT&T?  It's going for something like 9x earnings with a 7% yield.  Kind of cheap unless it is going out of business.  Obviously a very real risk of a value trap but there is some safety via the dividend.

 

My main issues is they they have been terrible operators historically and many of their acquisitions have not performed. Direct TV is a dead man walking in the media landscape. While the TWC assets are pretty high quality, I am no sure they won’t manage to screw them up. I’d rather own something in the media business where management is proven to be strong, even if the stock is a bit more expensive. CMCSA is my main pick with CHTR a distant second.

[vince]

Just a quick look at qtr 3 results and I think it will go down as a huge opportunity missed for anyone not buying this stock, it actually touched 22.50 or 17 billion and change, lmao, receiving 12-13 billion in cash and ongoing substantial normalized earning power.  On the other hand their product performance still doesn't look impressive and they havent put together a couple of consecutive good qtrs of product, revenue, and earnings growth in years.  They have grown and are still growing every qtr so they deserve a decent multiple but Mike Fries performance has been atrocious imo and they absolutely do not deserve a premium multiple

[ander]

Barrons article on Malone holdings today includes interview from him. Note the following on LBTYK:

 

“The market is skeptical that the deal will close and cautious about what the company will do with the cash if it closes,” Malone says. “Would I buy the stock here? Probably not. If the deal closes, Liberty Global is very cheap. If not, it’s appropriately priced.” Malone thinks the market is too cautious on regulatory approval. He puts an 80% chance of approval.

 

He sounds a little bit more skeptical of approval than I thought (especially if he’s saying 80% publicly my guess is that he really thinks likelihood of approval to be lower).

 

I guess another question would be if the deal falls apart how does the entity unlock value going forward.

[Spekulatius]

Barrons article on Malone holdings today includes interview from him. Note the following on LBTYK:

 

“The market is skeptical that the deal will close and cautious about what the company will do with the cash if it closes,” Malone says. “Would I buy the stock here? Probably not. If the deal closes, Liberty Global is very cheap. If not, it’s appropriately priced.” Malone thinks the market is too cautious on regulatory approval. He puts an 80% chance of approval.

 

He sounds a little bit more skeptical of approval than I thought (especially if he’s saying 80% publicly my guess is that he really thinks likelihood of approval to be lower).

 

I guess another question would be if the deal falls apart how does the entity unlock value going forward.

 

Seems more sceptical than I would think. Appropriately priced when the deal doesn’t go through isn’t the consensus here. But then again, we have almost 5x EBITDA/EV leverage and the last quarterly results were nothing to write home about (as usual). I do think it’s cheap, but I also think the chance that the deal does not go though is a bit higher than the consensus here.

[cmlber]

Barrons article on Malone holdings today includes interview from him. Note the following on LBTYK:

 

“The market is skeptical that the deal will close and cautious about what the company will do with the cash if it closes,” Malone says. “Would I buy the stock here? Probably not. If the deal closes, Liberty Global is very cheap. If not, it’s appropriately priced.” Malone thinks the market is too cautious on regulatory approval. He puts an 80% chance of approval.

 

He sounds a little bit more skeptical of approval than I thought (especially if he’s saying 80% publicly my guess is that he really thinks likelihood of approval to be lower).

 

I guess another question would be if the deal falls apart how does the entity unlock value going forward.

 

Seems more sceptical than I would think. Appropriately priced when the deal doesn’t go through isn’t the consensus here. But then again, we have almost 5x EBITDA/EV leverage and the last quarterly results were nothing to write home about (as usual). I do think it’s cheap, but I also think the chance that the deal does not go though is a bit higher than the consensus here.

 

I'd take the "probably wouldn't buy" comment with a grain of salt.  I wouldn't expect John Malone, knowing there is a high chance LBTYK will be deploying $10-12 billion in buybacks on a sub $20 billion market cap in the near future, to do anything but talk down the value of the stock.

[Spekulatius]

Barrons article on Malone holdings today includes interview from him. Note the following on LBTYK:

 

“The market is skeptical that the deal will close and cautious about what the company will do with the cash if it closes,” Malone says. “Would I buy the stock here? Probably not. If the deal closes, Liberty Global is very cheap. If not, it’s appropriately priced.” Malone thinks the market is too cautious on regulatory approval. He puts an 80% chance of approval.

 

He sounds a little bit more skeptical of approval than I thought (especially if he’s saying 80% publicly my guess is that he really thinks likelihood of approval to be lower).

 

I guess another question would be if the deal falls apart how does the entity unlock value going forward.

 

Seems more sceptical than I would think. Appropriately priced when the deal doesn’t go through isn’t the consensus here. But then again, we have almost 5x EBITDA/EV leverage and the last quarterly results were nothing to write home about (as usual). I do think it’s cheap, but I also think the chance that the deal does not go though is a bit higher than the consensus here.

 

I'd take the "probably wouldn't buy" comment with a grain of salt.  I wouldn't expect John Malone, knowing there is a high chance LBTYK will be deploying $10-12 billion in buybacks on a sub $20 billion market cap in the near future, to do anything but talk down the value of the stock.

 

True, he has a habit of talking his book. However, I haven’t seen any recent purchases from Malone, or did I miss them?

[bigbluffzinc]

I read through the article too.  Doesn't make much sense to me. 80% chance deal goes through.. if deal goes through stock is cheap.. (my inference is 80% chance stock is cheap).. conclusion is "don't buy the stock"..  :o

 

 

[vince]

I read through the article too.  Doesn't make much sense to me. 80% chance deal goes through.. if deal goes through stock is cheap.. (my inference is 80% chance stock is cheap).. conclusion is "don't buy the stock"..  :o

 

I couldn't agree more, it makes no sense.  Maybe the author wrote it down wrong, who knows....but if there is 80% chance of a very cheap stock and a 20% chance of a fairly valued stock, that makes for a good-great investment.  Even the ratio makes no sense, how can the attractiveness of the stock fall so steeply, its not like they are getting a once in a lifetime valuation for Germany.  I actually think they sold their best asset, rather they should have sold that british asset where if they raise the price from 50 dollars (thats a complete bundle folks) to 50.50 they have to keep an eye on churn.  My opinion is that the CEO is crap and the assets are being undermanaged.  If you read the transcripts closely you will see what I am talking about, Fries is not equipped to manage a national european cable business, its that simple.

[Munger_Disciple]

I read the article and find Malone's comments confusing at best and disingenuous at worst. Especially the part where he says "Would I buy the stock here? Probably not."

 

Liberty Global has been buying back a ton of stock at higher prices than the current price and Malone controls it. On the other hand he may be right when he says it is fairly priced if the Vodaphone deal doesn't go through because they are getting a pretty hefty premium for the assets.

[dwy000]

The comment makes no sense.  If it's worth more with a deal then by definition the value with no deal has to be a lot lower than the price today - unless the market is pricing 100% chance of no deal happening (which seems highly unlikely).