Special Situations: Altice / Numericable
Re-iterating SHORT Altice LONG Numericable
ATC NA: Eur 47.51; NUM FP: Eur 43.49
July 8, 2014
We updated our Altice NAV estimates for the various transactions carried out by Altice recently, including the capital increase to fund the Carlyle/Cinven transaction, the SFR deal, and the acquisition of a 2.6% NUM stake from Pechel and Five Arrows Funds. We now estimate an NAV per share of ~€32. The current price is at ~47% premium to our estimated NAV. However, the market seems to price-in the potential future M&A upside and margin expansions at NUM and unlisted cable assets inside Altice. Assuming margins do expand, we would value Altice at ~€38 a share. Even then the current share price would be at a ~22% premium to our optimistic NAV estimate. Recently, index inclusions (Stoxx 600, MSCI) have contributed to push-up Altice well beyond NAV. Hence, we believe that the current premium to NAV looks excessive and we would reiterate our Short Altice/Long NUM FP trade, while hedging Altice’s other cable assets with a portfolio of listed European cable companies.
FULL REPORT ATTACHED