Sean Murphy’s investment thesis Grupo Televisa from the IRA Sohn Conference 2015.
Investment Thesis on Grupo Televisa
- Leading vertically integrated media company – best-in-class management team
- US cable and content companies have been trying to achieve this for decades
- Univision IPO is near-term catalyst to valuation realization
- TV has 38% ownership stake and gets paid 12% royalty stream
- Recent changes to foreign ownership rules in US allowing for greater ownership
- Opportunities for substantial value creation across all Mexican segments
- Cable #1 Market Share (11% of Mexican HHs)
- Satellite #1 Market Share (22% of Mexican HHs)
- Content #1 Market Share (Highest Ratings, Most Viewed)
- Holding company structure makes SOTP best valuation methodology
- We view SOTP valuation of $45-57/share of 24-55% upside
TV is Undervalued Today
TV has 24% upside in our Base Case SOTP valuation
- Given the highly predictable nature of the cash flows, GCC is confident in its $16 / share valuation of Univision’s licensing business
- This implies that the rest of the business trades at 6.0x 2014 EBITDA (assuming Univision equity value of $7 per share)
New Board Members – Implications?
Grupo Televisa has nominated three interesting Board members in the past month
- Mike Fries – CEO of Liberty Global
- We expect Mike Fries will help think about appropriate capital structures to drive levered equity returns and minimize taxes
- David Zaslav – CEO of Discovery
- We expect David Zaslav will help TV explore content value maximization on a global scale
- Jon Feltheimer – CEO of Lionsgate
Early Innings of Cable Roll-Up in Mexico
Cable in Mexico looks like the United States in the late 1980s
– Grupo Televisa has grown its cable RGUs 60% over the last 2 years today reaching 11% of Mexican HHs
– Last quarter, TV rolled out its first competitive triple-play offering in Mexico City
– More than 70% of the population can afford double / triple play services (yet penetration is at ~50%)
– Comcast’s stock is up 24x since 1988
Univision Monetization
Univision represents ~50% of GCC’s Base Case Valuation
- IPO or monetization event within 12 months
- Book value is $1.9 billion versus our base case of $4.0 billion
- 2016 Incentive (Broadcast Spectrum) Auction could be worth $2bn+
- Univision is the largest holder of 600 MHz Broadcast Spectrum in the US
- 13 duopolies (9 in top 20 markets) & channel-sharing opportunities in 6 other markets (5 in top 20 markets)
- Grupo Televisa has a path to control Univision with expected changes to FCC foreign ownership regulations
See full slides below.
