Ray of light?
Vivendi’s Q1 results were slightly ahead thanks to growth at UMG. While there is no denying that sustainable growth in music would be a clear positive, quarterly trends can be volatile and Canal+ faces structural headwinds in their French pay-television business. We still see limited growth when combining the two businesses. Vivendi currently trades at 10-11x EV/EBITDA on an underlying basis, close to the sector. We feel this is generous but the dividend yield provides downside protection (9% including announced extraordinary). With 2015 forecasts underpinned and with the uncertainty on cash returns lifted, Vivendi is now a market call in our view. With average operating trends and no buyback uplift, we see the shares hovering at €21- 22. For investors still seeing upside in the market, Vivendi is a good source of funds.
For investors thinking the market is fully valued, the dividend yield has some attraction. We increase our sum-of-the parts to €20.50
--> Vivendi has €7.3bn of cash at their disposal post C+ deal – Our analysis of Vivendi cash
flow, cash return and future disposal yields €7.3bn (see Figure 4 for full moving parts).
There were few pointers in the call on what management intend to do with the cash
above and beyond the €0.5bn contemplated C+ bid. The only point raised by CEO
Arnaud de Puyfontaine was that they “would not go back to telecoms” but if they were
“given a stake in a telecom company” and it lead to “benefits in media” then they would
“look at it”.
--> Commentary on Mediaset Premium – Multiple press articles have linked Vivendi with
getting involved with Mediaset Premium, either through full control or as a partner (e.g.
Reuters 29 April 2015). Vivendi commented it was too early to make any comments, but
that they were following the situation, as they do in many countries with many different
assets.