My valuations of Vivendi

I have used two different valuation techniques for Vivendi (VIVHY) Here we go.

Asset reproduction valuation done on 4-2-2012.  All #’s in millions of Euros unless otherwise noted.  Using 2011 10-k.

These valuations are done by me, using my estimates, and is not a recommendation for you to buy the stock. DO YOUR OWN HOMEWORK.

Assets:                                                   Book Value:                                  Reproduction Value:
Current assets
Cash                                                        3,304                                              3,304
Marketable Securities                              1,544                                              1,544
Accounts Receivable (net)                      6,730                                              4,500
Inventories                                               805                                                   500
Prepaid Expenses                                     0                                                       0
Deferred Taxes – tax liability                    700                                                  400
Total current assets                               13,083                                             10,248

PP&E Net                                                 9,001                                              6,000
Goodwill                                                  25,029                                            12,514.5
Intangible Assets                                     6,814                                                3,407
Total Assets                                            53,927                                            32,169.5

Number of shares 1,242
With IA: 53,927/1,242=43.42 Euros per share = $57.40 per share
Without IA: 47,113/1,242=37.93 Euros per share = $50.14 per share

Reproduction value:
With IA 32,169.5/1,242= 24.90 Euros per share = $34.24 per share
Without IA 28,762.5/1,242= 23.16 Euros per share = $30.62 per share

Current share price on 4-21-2012 = $16.50 per share

Sum of the parts valuations done on 4-26-2012 #s in millions of Euros unless otherwise noted.

44% of SFR bought in 2011 for 77,750 million Euros. Implied value of total stake since Vivendi now owns 100% of SFR = 17,360 Euros

60% of Activision (ATVI) =6,587 Euros

100% of SFR + 60% of ATVI =23,947 m Euros = $31,629 million

Vivendi has a total market cap currently of $23.46 billion

So you are getting most of the 60% of ATVI, all of GVT, all of Canal+, all of UMG, 53% of Maroc Telecom, which equals 5.41 billion Euros, all cash and debt for free, by just purchasing part of ATVI and all of SFR.
GVT, Canal+, UMG, and Maroc Telecom are the rest of their subsidiaries.

Valuing the whole of Vivendi, cash, and debt using above estimates, I am estimating very conservatively 40 Billion Euros = $53.832 billion of total value for Vivendi.

$53.832 billion/number of shares at full dilution of 1.250 billion= $43.07 per share

Current share price = $18.60 per share

This valuation would be used if they were to do a spin off or selling some of their assets and companies.

The reproduction valuation is generally the most conservative intrinsic value estimate and the one I use the most since I am very conservative and want the biggest margin of safety as possible.

Some other things I like about Vivendi besides the massive margin of safety are they pay a healthy yearly dividend. They have consistent free cash flow of at least 3 billion Euros per year after cap ex. Good margins. Cash and cash equivalents of over 3 billion Euros. Net operating loss carry forwards of around 8 billion Euros. Seth Klarman owns shares of Vivendi at his hedge fund Baupost Group, and has been buying more recently, actually got lucky and got in at a cheaper price than Klarman. Also the management of Vivendi is reviewing what they could do to unlock the value that is missing right now, by their own estimates at least 40%, could be spin offs or sale of some of their subsidiaries.

Risks: A lot of debt and continual huge amounts of cap ex in their telecom subsidiaries. European debt issues; most of their business is done in Europe, specifically France. If they decide not to do a spin off or asset sale it could take a while to unlock value, which would not bother me since it would enable me to acquire more shares.

Would like them to eventually do some kind of spin off or asset sale to pay down their debt which should also increase the share price. Would not even mind if they cancelled the dividend for a year or two to pay down debt either.

Feel free to give feedback.