Vivendi SA
Vivendi SA
The rationale of investing VIV stock is that it is undervalued on the basis of earning power. In the past, VIV has been acquiring and divest its companies over again and again. These companies are usually top leader or number 2 in its own specific industries. As a result, it can be difficult for the analysts to value it as VIV constantly change itself. Debt was used to finance acquisitions that Ire made few years ago. Previous CEO resigned due to strategic difference between him and the chairman.
I bought Vivendi (FRA: VIV) at €16.38 on 9 February 2012 and sold at €20 on 7 February 2014. I made estimated profit of 32.8%, net of transaction costs.
VIV is French conglomerate firm that has companies that are leader or number 2 in their own respective industries. It has paid the following dividend during our holding period:
1. €1 per share plus 1 bonus share per 30 shares
2. €1 per share
The rationale of investing VIV stock is that it is undervalued on the basis of earning power. In the past, VIV has been acquiring and divest its companies over again and again. These companies are usually top leader or number 2 in its own specific industries. As a result, it can be difficult for the analysts to value it as VIV constantly change itself. Debt was used to finance acquisitions that Ire made few years ago. Previous CEO resigned due to strategic difference between him and the chairman.
The current plan being put forward by the board of directors and the management is to reduce debt by using the proceeds which are made by selling selected companies. These companies are deemed to be non-strategic to VIV in the eyes of the board of directors. The aim is to have VIV to be international media group. The major future earnings will be derived from Universal (music and movie producers), Canal+ (French TV station), and GVT (Brazilian telecommunication).
In addition, its French telecommunication, SFR is suffering from highly competitive environment where telecom firms are having price war, affecting SFR’s profit margin. That is why VIV wants to spin-off with the mind of certain share price or sell SFR to its competitor at reasonable price.
The catalysts behind the rise of the share price are as follows:
1. Sale of large percentage of Activision Blizzard back to itself (this effectively turn Activision Blizzard from subsidiary to associate in the eye of financial reporting standard)
2. Public announcement to divest unprofitable companies
3. Confirmation that Etisalat acquire VIV’s Marco telecom (telecommunication firm in Morroco)
I am selling VIV because I don’t think highly of media companies’ earning power. Furthermore, I have no idea about the degree of its earning power in the entertainment and media industry. Thus, I am taking the safe option to sell it.
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