May 2015
GRUPO TELEVISA: VALUE WITH A PATH TO OUTPERFORMANCE Grupo Televisa (NYSE:TV) Current Price: $36.50 Market Cap: $21 billion 1-Year Target Price: $45 - 57 (24% - 55% upside)
Sean P. Murphy (617) 849-6587
[email protected]
Game Creek Capital
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Disclaimer The analyses and conclusions of Game Creek Capital, L.P., a Delaware limited partnership (“Game Creek”), contained in this presentation are based on publicly available information. Game Creek recognizes that there may be confidential information in the possession of Grupo Televisa (the “Company”) discussed in the presentation that could lead the Company to disagree with Game Creek’s conclusions. This presentation and the information contained herein is not a recommendation or solicitation to buy or sell any securities. As of the date of this presentation, Game Creek’s client, Game Creek Fund, L.P., a Delaware limited partnership, currently beneficially owns equity securities in the Company. The Company does not represent all of the securities purchased, sold or recommended for the Company’s clients, including the Fund. The reader should not assume that the Fund’s investment in the Company was or will be profitable. The analyses provided may include certain statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the Company, access to capital markets and the values of assets and liabilities. Such statements, estimates, and projections reflect various assumptions by Game Creek concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. Accordingly, no party should purchase or sell securities on the basis of the information contained in this presentation. Game Creek expressly disclaims liability on account of any party’s reliance on the information contained herein with respect to any such purchases or sales. Game Creek manages clients that are in the business of trading – buying and selling – securities and financial instruments. It is possible that there will be developments in the future that cause Game Creek to change its position regarding the Company. Game Creek may buy, sell, cover or otherwise change the form of its investment regarding the Company for any reason. Game Creek hereby disclaims any duty to provide any updates or changes to the analyses contained herein, including, without limitation, the manner or type of any Game Creek investment.
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Investment Thesis • 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
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TV is a Highly Diversified Media / Telco Platform Business Segment
Content
Univision Licensing
Univision Ownership Content (excl. Univision)
Description
% of '14 EBITDA
Business Model Similar To:
- Royalty stream of 12%+ of Univision's TV revenue - Royalty rate increases to 16%+ in 2018 - 38% economic ownership of Univision - IPO expected 2H 2015
14%
Not Consolidated
- 4 broadcast channels & 24 Pay TV networks 37% - Produces 90,000 hours of content annually
Distribution
- Majority ownership in 6 cable operators Telecom
26% - ~3.4 mm TV subs (~11% of Mexican HHs)
14.5mm US subs 5.8mm US subs 12% of US HHs 5% of US HHs
- 58.7% ownership of Sky Mexico (DTV is partner) Satellite (Sky)
27% 14.0mm US subs 12% of US HHs
- 6.6mm total subs (~22% of Mexican HHs)
Other (1)
1. Includes publishing, other, intersegment operations, and corporate expenses.
(3%)
20.4mm US subs 17% of US HHs
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TV is Undervalued Today
Distribution
Content
Business Segment
Current Valuation $ Per Share
Univision Licensing
15.68
Univision Ownership
7.16
TV has 24% upside in our Base Case SOTP valuation • Given the highly predictable nature of
Content (excl. Univision)
13.95
Telecom
9.88
Satellite (Sky)
5.13
Other (1)
(1.56)
Net Debt Total Current % vs. Current
(5.13) 45.11 36.50 23.6%
1. Includes publishing, other, intersegment operations, and corporate expenses.
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)
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TV has Underperformed its Peers Content 110.0% Satellite 97.3% Cable 90.5%
S&P 500 54.9% TV 53.9% Mexico IPC 24.4%
Note: Content peers include CBS, TWX, VIAB, FOXA, DIS, DISCA, SNI. Cable peers include CMCS, CVC, TWC, LBTYA, RCI. Satellite peers include DTV, DISH.
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New Board Members – Implications? 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
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Early Innings of Cable Roll-Up in Mexico Cable in Mexico looks like the United States in the late 1980s - 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 US 1988 Pay TV Penetration
Mexico 2014
54%
US 2014
52%
84%
Avg. Monthly Cable Bill
$
14.52
$
14.87
$
64.41
Avg. Income Per Capita
$
1,790
$
859
$
4,420
US 2001 % of Population Using Internet
49%
Mexico 2014 49%
US 2014 87%
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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) • Televisa has a path to control Univision with expected changes to FCC foreign
ownership regulations
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GCC has Identified Multiple Ways to Win
Distribution
Content
Business Segment
Upside Opportunity $ Per Share
Univision Licensing
17.96 14.6% Upside
Univision Ownership
10.14 41.5% Upside
• Near-term catalysts include (i) an expected
Content (excl. Univision)
18.01 29.1% Upside
Telecom
11.36 15.0% Upside
Satellite (Sky)
Other (1)
There is additional 31%+ upside, for total upside of 55%+, associated with identifiable, near-term catalysts
5.73 11.6% Upside
2015 Univision IPO and (ii) increased revenue growth and margin expansion in the Telecom business • Medium-term catalysts include (i) continued
consolidation to create a national cable operator and eventual spin of the business and (ii) “investor-like” allocation of capital by management
(1.56)
• Long-term catalysts of monetizing spectrum at Net Debt Total Current % vs. Current
(5.13) 56.51 36.50 54.8%
1. Includes publishing, other, intersegment operations, and corporate expenses.
Univision and potentially gaining control
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FULL PRESENTATION
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Table of Contents A. Summary B. Unmatched Set of Assets 1. Univision 2. Telecom 3. Sky 4. Content C. Management & Capital Structure D. Valuation & Risks E. Appendix
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SUMMARY
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Investment Overview We believe Televisa offers investors an opportunity to own world class assets run by smart managers at a discounted valuation. Televisa’s unique set of media & telecom assets are in the early innings of benefitting from long term secular tailwinds. We see a 1-year price target of $45.11 (24% upside) and believe Televisa has a multi-year runway in your portfolio
Bull Case +55% ($56.51)
Current Price $36.50
Base Case +24% ($45.11)
Bear Case -17% ($30.13)
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Investment Thesis Televisa (“TV”) is the most vertically integrated media company in the world and is currently being underappreciated by the market. As a market leader in both content and distribution, Televisa has already accomplished what large US media peers (Comcast, AT&T, etc.) are trying to do today, without the same regulatory restrictions •
Strong Competitive Positioning: • Unmatched Set of Media / Telco Assets. Unique set of assets has resulted in a media / telco platform with revenue diversification and market leading positions in industries with high barriers to entry. • Content Value is Increasing. The premium placed on content will persist. Content has high barriers to entry, promotes customer loyalty, is difficult to regulate, and is becoming a brand differentiator for large media / telco / tech companies given the proliferation of distribution channels. TV is the largest producer of content in Mexico and in the US for Hispanics. (TV produces 90,000 hours of content per year versus only 75,000 hours in the Warner Brothers library) • Shareholder-Friendly Management Team. Management is incentivized alongside shareholders and has shown a focus on creating shareholder value, capital allocation and prudent balance sheet management.
•
Medium-Term Macro Tailwinds: • Increase in US Hispanic Consumer Spend. Exposure to rapidly growing Hispanic community in the US (18% of US population). Univision is currently ranked as the No. 3 Broadcast Network in the US regardless of language. • TV owns 38% of Univision and collects a sizable royalty stream from Univision • Regulatory Reform Provides Opportunity in Mexico and US. Regulatory reform in Mexico has minimal negative impact on TV’s Pay-TV business and provides upside opportunity for TV’s telecom companies. Regulatory reform in the US has given TV a path to own more Univision equity. • Cable Roll-Up Strategy in Mexico. Televisa is in the same position the US cable companies were in 1988 – as Pay-TV and broadband penetration increases in Mexico, Televisa will stand to be the clear beneficiary.
Current valuation provides compelling risk / reward proposition. We view TV as being a long-term compounder fueled by strong secular tailwinds, a superior set of assets, and identifiable catalysts. • TV trades with a 24% upside to fair value today with multiple ways to unlock value. • Bull case valuation with 55%+ upside can be achieved through identifiable catalysts including (i) Univision IPO, (ii) continued roll-up of the Mexican cable industry, and (iii) Univision spectrum sale. • TV has traded at a discount to US peers largely due to regulatory concerns and complexity which will disappear in time.
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TV is Undervalued Today – GCC Base Case
Content
Business Segment
Current Valuation $ Per Share Total ($mm)
Univision Licensing
15.68
9,013.7
Univision Ownership
7.16
4,117.2
Content (excl. Univision)
13.95
8,022.6
TV trades with 24% upside in our Base Case sum of the parts valuation • This SOTP is intended to be a
status quo analysis of what the business is worth today and does not include any of GCC’s anticipated catalysts • Given the highly predictable nature
9.88
5,682.4
Satellite (Sky)
5.13
2,952.4
(1)
(1.56)
(899.3)
Net Debt
(5.13)
(2,949.7)
Total
45.11
25,939.2
Current % Difference vs. Current
36.50 23.6%
20,987.5 23.6%
Distribution
Telecom
Other
1. Includes publishing, other, intersegment operations, and corporate expenses.
of the cash flows, GCC is confident in its $16 / share valuation of UVN’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).
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What Wall Street has been Missing 1. TV is no longer just a “Mexican advertising” or content company • We believe that there are still investors and sell-side analysts that focus too much on quarterly advertising
despite (i) TV’s diversification away from being a “content only” company and (ii) TV’s unique ability to manage content margins “overnight” if need be •
“We continue to view Televisa primarily as a content company” – Sell Side Analyst 4/27/15
• As recently as 2005, the Mexican content business was almost 75% of revenues – today it is only 38% excluding
Univision (and only 32% advertising) • We value the Mexican advertising business as only 26% of our Base Case Value – versus 51% for Univision and 33% for Telecom & Sky (1) 2. TV’s broadcast networks in Mexico and Univision’s networks in the US are not susceptible to the shift of
advertising dollars from television to digital that US language networks have been experiencing • 91% of Univision’s audience views content live every night (by far the highest of any network in the US) • ~70% of Univision’s audience is unduplicated • Only 49% of the Mexican population is using the internet • TV has 70% market share in broadcast TV in Mexico making it difficult to displace them or stop advertising with them. It would also be difficult for anyone to offer an OTT solution that does not include TV’s content. •
Carlos Slim’s companies stopped advertising with TV years ago due to the competitive nature of the two companies. However, with the increased competition in telecom, Grupo Carco is now advertising again with TV in order to go head-to-head with AT&T
3. Telecom capex levels are inline with US cable capex levels during historical investment phases.
Management is correctly planning ahead to take advantage of a long term secular tailwind 4. Sell-side analyst projections (i) underestimate Univision’s value, (ii) don’t contemplate the future earnings potentials
of Telecom or Sky (medium-term projected margins are too low in Telecom and ARPUs too low in Sky), and (iii) don’t contemplate the future value of TV’s content library 1. Adds up to more than 100% because it excludes Other, Corporate Expenses, and Net Debt.
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Company Snapshot Company Overview
Financial Highlights
• Headquartered in Mexico City, Televisa (“TV”) is the
largest media company in the Spanish-speaking world • TV is a vertically-integrated media / telco company with
significant content and distribution businesses: • Content (44% of Revenue):
•
•
4 Broadcast Networks
•
24 Pay-TV Brands
•
Royalties & 38% Ownership of Univision
Distribution & Other (56% of Revenue): •
Sky (satellite TV)
•
6 cable companies
27-Apr-15 36.50 575.0 20,988
Net Debt (MXN in mm) MXN:USD Net Debt (USD in mm)
39,261 15.40 2,549
Enterprise Value (USD in mm)
23,537
Short Interest (mm)
(1)
Income Statement Revenue % growth
2.9
2010
2011
2012
2013
2014
57,857 10.5%
62,582 8.2%
69,291 10.7%
73,791 6.5%
80,118 8.6%
COGS Gross Profit % of Revenue
(26,295) (28,133) (29,826) (29,756) (31,346) 31,562 34,449 39,465 44,035 48,773 54.6% 55.0% 57.0% 59.7% 60.9%
Opex EBITDA % of Revenue
(9,400) (10,220) (12,201) (15,367) (17,971) 22,162 24,229 27,264 28,668 30,802 38.3% 38.7% 39.3% 38.9% 38.4%
D&A Other Expense EBIT % of Revenue
(6,579) 0 15,583 26.9%
Net Income % growth
Market Data Stock Price (USD) Shares Outstanding (mm) Market Cap (USD in mm)
(MXN in millions)
(7,362) (593) 16,274 26.0%
7,683 6,666 27.9% (13.2%)
(8,474) (650) 18,140 26.2%
(9,846) (11,563) (83) (5,282) 18,738 13,957 25.4% 17.4%
8,761 7,748 5,387 31.4% (11.6%) (30.5%)
Cash Flow EBITDA Capex EBITDA - Capex % of Revenue
22,162 (11,306) 10,856 18.8%
Leverage Debt Cash Net Debt Net Debt / EBITDA
47,049 55,965 52,991 60,056 80,998 (31,389) (21,699) (24,381) (20,415) (34,518) 15,659 34,266 28,611 39,641 46,480 0.7x 1.4x 1.0x 1.4x 1.5x
1. Currently 1 USD = 15.4 MXN.
24,229 27,264 28,668 30,802 (9,669) (11,428) (14,871) (17,004) 14,560 15,836 13,797 13,798 23.3% 22.9% 18.7% 17.2%
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UNMATCHED SET OF ASSETS
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TV is a Highly Diversified Media / Telco Platform TV is the most vertically integrated media company in the world with leading content and distribution businesses. No other media company has a comparable breadth of businesses and diversification of revenue streams.
Business Segment
Distribution
Content
Univision Licensing
Description
% of 2014 Revenue
% of 2014 EBITDA
- Licensing royalty stream of 12%+ of UVN's audiovisual revenue - Leading Spanish-language media company in the US - #4 network in the US regardless of language - Retrans revenue expected to 2x in 4 years, reducing reliance on ad revenue
5%
14%
Not Consolidated
Not Consolidated
Univision Ownership
- 38% economic ownership of UVN (8% direct, 30% through converts) - Leading Spanish-language media company in the US - #4 network in the US regardless of language
Content (excl. Univision)
- Operates 4 broadcast channels in Mexico - Produces and distributes 24 Pay-TV networks in Mexico and globally - Produced more than 93,000 hours of content in 2013
38%
37%
- Majority ownership in 6 cable operators - 6.9mm Total RGUs (including 3.4mm Video RGUs or 11% of Mexican HHs) - Offers television programming, high speed internet, and IP telephony
26%
26%
22%
27%
Telecom
Satellite (Sky)
Other
(1)
- 58.7% ownership of Sky Mexico (partner is Direct TV) - 6.6mm subs (21.6% of Mexican HHs) - Mexico's leading direct-to-home satellite television system - Also operates in Central America and the Dominican Republic - Publishing is the largest piece of Other Revenue - Also includes gaming, soccer teams, Azteca stadium and radio businesses
1. Includes publishing, other, intersegment operations, and corporate expenses.
Business Model Similar To:
14.5mm US subs 5.8mm US subs 12% of US HHs 5% of US HHs
14.0mm US subs 12% of US HHs
9%
(3%)
20.4mm US subs 17% of US HHs
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1. UNIVISION
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1. Univision Univision represents ~50% of GCC’s Base Case Valuation • •
We expect Univision’s valuation to become clear upon its imminent IPO / sale There are additional sources of “hidden value” as we believe no one has been focused on Univision’s spectrum value or 2016 political proceeds
Univision Overview & Valuation Catalysts •
Univision is the leading media company serving the 54mm Hispanic
Royalty Stream •
population (17% of US population) in America with #1 market share in each of its businesses •
Univision Network: one of the top five broadcast networks in the US regardless of language; reaches 94% of US Hispanic TV households
•
whereby TV gets paid ~12%+ of Univision’s revenue •
The royalty rate is set to increase to ~16%+ in 2018
•
Licensing revenue to Televisa is nearly 100% margin as there are no incremental costs to Televisa
Other assets include: (i) Unimas (broadcast network reaching 88% of US Hispanic TV HHs), (ii) Univision Cable Networks, (iii) 61 Owned
•
advertising assets Univision is 62% owned by a private equity consortium of Haim Saban, Madison Dearborn, Providence, TPG, and Thomas H. Lee •
Ownership Stake
The PE owners acquired Univision in March 2007. Today, the investment is approaching the end of its investment horizon and we
•
believe an exit (IPO or M&A) is imminent: •
We forecast a 6-year revenue CAGR of 7% (almost 2x its US peers)
Univision’s Royalty Stream is valued at $15-16 per share
and/or Operated TV stations and 67 radio stations, and (iv) digital and
•
Televisa has a perpetual licensing agreement with Univision
Televisa effectively owns 38% of Univision through an equity stake and convertible debt making Televisa the entity with the largest
Univision has publicly stated that an IPO is likely within 12-18
economic interest in Univision
months •
In time, it would make sense for TV and Univision to consolidate but
•
Refinanced its two nearest term maturities in early 2015
•
Ended its management agreements with the PE owners and
it’s unlikely until (i) Univision’s net debt is lower and (ii) the US
technical assistance agreement with TV
foreign ownership rules for media companies are more clear
•
David Zaslov left the Board of Univision and has been nominated to join the Board of Televisa
Univision Ownership Stake is valued at $7-8 per share
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Valuation of Royalty Stream from Univision Univision’s Royalty Stream is worth $15-16 or 35% of GCC’s Base Case Valuation (Numbers in millions, unless otherwise stated) 2014A 2,454.6 10.6% 77.8 154.8 99.0% 2,297.7 2,609.4 11.91% 11.91% 273.7 310.8
2015E 2,577.3 5.0% 178.0 15.0% 2,755.4 11.91% 328.2
2016E 2,783.5 8.0% 204.7 15.0% 2,988.2 11.91% 355.9
2017E 3,061.9 10.0% 225.2 10.0% 3,287.1 11.91% 391.5
2018E 3,306.8 8.0% 247.7 10.0% 3,554.5 16.22% 576.5
2019E 3,472.2 5.0% 272.5 10.0% 3,744.6 16.22% 607.4
2020E 3,645.8 5.0% 292.9 7.5% 3,938.7 16.22% 638.9
Total TV & Interactive Revenue (USD) Amount Greater Than 2010 Revenues ($1.65bn) (USD) Incremental Royalty Rate Incremental Royalties (USD)
2,297.7 647.7 2.00% 13.0
2,609.4 959.4 2.00% 19.2
2,755.4 1,105.4 2.00% 22.1
2,988.2 1,338.2 2.00% 26.8
3,287.1 1,637.1 2.00% 32.7
3,554.5 1,904.5 2.00% 38.1
3,744.6 2,094.6 2.00% 41.9
3,938.7 2,288.7 2.00% 45.8
Formula Calculation Forecasting Error % of Formula Calculation Total Royalties (USD) % growth
286.6 (13.4) (4.7%) 273.2
330.0 (16.0) (4.8%) 314.0 14.9%
350.3 (16.9) (4.8%) 333.3 6.2%
382.7 (18.5) (4.8%) 364.1 9.2%
424.2 (20.5) (4.8%) 403.7 10.9%
614.6 (29.7) (4.8%) 584.9 44.9%
649.3 (31.4) (4.8%) 617.9 5.6%
684.6 (33.1) (4.8%) 651.5 5.4%
Tax Rate
26.7%
28.6%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
Licensing Cash Flow to TV (USD)
200.2
224.2
233.3
254.9
282.6
409.4
432.5
456.0
Univision TV Revenue (USD) % growth Univision Interactive Revenue (USD) % growth Total TV & Interactive Revenue (USD) Royalty Rate Base Royalties (USD)
2013A 2,219.9
Base Case 8.00% 4.00% 11,857.3
Discount Rate Long Term Growth Rate Terminal Value (USD) Cash Flows for DCF (USD) Present Value of Cash Flows (USD) - Base Case Per Share (USD) - Base Case Bear Case / Upside Case
233.3 9,013.7 15.68 12.35 / 17.96
254.9
282.6
409.4
432.5
12,313.3
CAGR '13-'18 8% 26% 9%
16%
15%
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Valuation of Univision Ownership Stake Televisa’s Ownership Stake of Univision is worth $7-8 or 16% of GCC’s Base Case Valuation •
Our base case is conservative and implies a 6.6% IRR and 1.7x MoM for the PE investors
(Numbers in millions, unless otherwise stated) Total Univision Revenue (USD) % growth Univision EBITDA (USD) EBITDA Margin
2016 EBITDA Forward EV / EBITDA Multiple EV (USD) Less: Net Debt (USD) Equity Value (USD) TV Ownership Equity Value to TV (USD) - Base Case Per Share (USD) - Base Case Bear Case / Upside Case
2013A 2,627.4 1,120.4 42.6% Base Case 1,487.8 13.5x 20,085.8 (9,251.0) 10,834.8 38% 4,117.2 7.16 5.69 / 8.64
2014A 2,911.4 10.8% 1,253.8 43.1%
2015E 3,057.0 5.0% 1,347.1 44.1%
2016E 3,301.5 8.0% 1,487.8 45.1%
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Add’l Upside Catalyst #1: Spectrum Auction We value Univision’s excess spectrum at $2bn-$2.5bn or an additional $1.50 per share for Televisa -
Univision is the largest holder of broadcast spectrum in the 600 MHz band and has duopolies and channel sharing opportunities in 14 of the Top 20 US Markets - Duopolies and channel sharing opportunities enable Univision to stay in business with no downside to current operations or financial outlook while being able to monetize its valuable excess spectrum assets
-
The FCC’s Incentive Auction is set for 2016 and, following the recent record-breaking AWS-3 Auction, the demand and valuation potential for spectrum-constrained major US cities is high (potentially higher than the FCC released Greenhill valuations below)
Market
DMA Rank
TV HHs
# of Stations By Power Level Class A Full Power Total
# of Stations To Be Sold Class A Full Power Total
Max
Class A Median
Full Power Max Median
Multiple Station Univision / Unimas Markets New York 1 7,384,340 Los Angeles 2 5,613,460 Chicago 3 3,484,800 Dallas 5 2,588,020 San Francisco 6 2,502,030 Houston 10 2,215,650 Phoenix 12 1,812,040 Miami 16 1,621,130 Sacramento 20 1,387,710 San Antonio 36 881,050 Fresno 55 576,820 Tucson 71 438,440 Bakersfield 127 221,740 Total 37,904,010
1 1
3 2 2 2 2 2 1 2 2 2 2 2 1
3 2 2 2 2 2 2 2 2 2 2 2 2
1 1
2 1 1 1 1 1 1 1 1 1 1 -
2 1 1 1 1 1 1 1 1 1 1 1 1
360 370 120 58 92 38 22 76 55 22 17 15 28
280 310 100 50 70 36 10 70 43 20 16 11 15
490 570 130 67 140 52 36 80 130 35 30 38 80
Channel Sharing Opportunities with Entravision Boston 7 2,433,040 Washington DC 8 2,412,250 Tampa 14 1,827,510 Denver 17 1,574,610 Orlando 18 1,490,380 Albuquerque 47 690,740 Total 10,428,530
-
2 2 2 2 2 2
2 2 2 2 2 2
-
1 1 1 1 1 1
1 1 1 1 1 1
77 98 43 22 67 6
77 67 39 10 44 5
140 140 71 33 85 9
410 340 120 53 110 45 223 78 94 29 26 20 31 UVN Value
93 130 60 28 68 5
UVN Value Assuming 50% Total Spectrum Value to UVN
Greenhill Valuation Max Median
980 570 130 67 140 52 22 80 130 35 30 38 28 2,302
820 340 120 53 110 45 10 78 94 29 26 20 15 1,760
140 140 71 33 85 9 478 239 2,541
93 130 60 28 68 5 384 192 1,952
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Add’l Upside Catalyst #2: 2016 Political Hispanics are the fastest growing population in the US •
The Hispanic population is expected to almost double over the next
2012 Presidential Race •
blacks and whites) making Hispanics 10% of the US electorate
35 years while the Non-Hispanic population grows at a 0.3% CAGR Hispanics Non-Hispanics Total
2015E 56,755 264,615 321,370
2050E 105,551 292,778 398,329
% of Total: Hispanics Non-Hispanics Total
18% 82% 100%
26% 74% 100%
Growth 86% 11% 24%
48% of Hispanic eligible voters turned out in 2012 (versus 65% for
•
Hispanics tend to vote 63% Democrat and 27% Republican
•
Obama’s campaign aimed ~10% of its money towards attracting Hispanic voters in key states while Romney spent just ~4%
•
“After six months of mulling over November’s election results, many Republicans remain convinced that the party’s only path to future victory is to improve the GOP’s appeal to Hispanic voters.” - Byron York, Washington Examiner May 2, 2013
Source: US Census Bureau
Increasingly Important Hispanic Vote & Univision Implications •
The Hispanic vote in the US is becoming increasingly important to win elections as proven by the outcome of the 2012 Presidential Race. We expect campaign spending on the Hispanic population to meaningfully increase in 2016 •
“From the beginning it was clear Hispanic voters would play a pivotal role this election (2012)… Yet neither party seems to have fully gotten the message. Investment in Spanish-language advertising is a mere fraction of what it should be…One cannot help but feel that both parties have a good deal of work to do if they hope to keep up with America’s fastest-growing population.” – Javier Palomarez, CEO of USHCC
•
“Come 2016, Latino voters may hold enough political clout to make or break any presidential hopeful.” – Maria Santana, CNN
•
In 2012, Univision made $37.2mm of political revenue despite being the #1 way to reach Hispanic voters by TV or radio in the US.
•
We expect 2016 political revenue to be magnitudes higher than 2012 given (i) the importance of the Hispanic voter in the US and (ii) a widely expected record-setting presidential campaign with no incumbent •
Univision is well positioned with owned and operated stations in Florida, Washington DC, North Carolina, etc.
Game Creek Capital
2. TELECOM
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Telecom TV’s Telecom business is worth $9-10 or 22% of GCC’s Base Case Valuation Cable in Mexico looks like it did in the US in 1988 and provides a long runway of growth - Management has structured the cable business as one separate entity. We believe this provides optionality for a spin in the future -
Telecom Overview •
Televisa is a leader in the Mexican cable industry with 6.9mm RGUs (including 3.4mm Video RGUs or 11% of Mexican HHs) across its six cable companies •
Majority owner of Cablevision (51% ownership), Cablemas (100%),
Telecom Valuation (Numbers in millions, unless otherwise stated) 2012A 2013A 2014A Telecom Revenue (MXN) 15,570.4 17,138.8 20,937.3 % growth 10.1% 22.2%
2015E 24,706.0 18.0%
2016E 28,411.9 15.0%
9,635.3 39.0%
11,364.8 40.0%
TVI (50%), Cablecom (100%), Tele-cable (100%), and Bestel (85%) •
TV is consolidating the cable industry in Mexico •
The Company is expected to continue consolidating while being
Telecom EBITDA (MXN) EBITDA Margin
5,812.8 37.3%
disciplined on valuation (e.g. Megacable is an asset of interest but not at current trading levels) •
Significant margin expansion opportunity •
Post-acquisition, TV has shown it’s ability to achieve significant
2016 EBITDA (MXN) EV / EBITDA Multiple EV (MXN)
6,131.8 35.8% BASE 11,364.8 10.0x 113,647.7
operating synergies through SG&A and procurement savings •
TV is able to control programming expense more than cable companies in the US as TV’s content division provides the largest amount of programming to the cable companies
•
New low cost triple play offering, Izzi, is gaining market share •
In Q4 2014, TV rolled out a low cost triple play option for consumers in Mexico City that has been very successful is gaining market share from incumbent Telmex
•
Izzi will be rolled out to the rest of TV’s cable footprint and will be accretive to margins by adding additional products (voice / data) to existing subscribers’ plans
TV Ownership
77.0%
EV to TV (MXN) 2015 FX Conversion (MXN:USD)
87,508.7 0.065
Value to TV (USD) - Base Case Per Share (USD) - Base Case Bear Case / Upside Case
5,682.4 9.88 5.86 / 11.36
7,882.9 37.7%
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Cable Opportunity – Mexico vs. US Pay TV Industry in Mexico looks like the United States in the late 1980s Since 1988, penetration in the US increased from 54% to 84% and the average monthly cable bill increased at a 6% CAGR which was double the rate of GDP growth over the same period - More than 70% of the population can afford double / triple play services (yet penetration is at ~50%) -
US 1988 Pay TV Penetration
Mexico 2014
54%
US 2014
52%
84%
30% Add'l Penetration
Avg. Monthly Cable Bill
$
14.52
$
14.87
$
64.41
6% CAGR
Avg. Income Per Capita
$
1,790
$
859
$
4,420
3% CAGR
Cable (% of Monthly Income)
0.8%
1.7%
1.5%
Population (mm) HHs (mm) People / HH
244 92 2.7
122 31 4.0
304 118 2.6
US 2001 % of Population Using Internet
49%
Mexico 2014 49%
US 2014 87%
38% Add'l Penetration
Sources: TV Company materials, Leichtman Research Group, California Cable & Telecommunications Association, New York Times, FCC Media Bureau’s Annual Survey of Cable Rates, Sentier Research, World Bank, Broadband Commission.
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Cable Capex Is Not a Bad Thing •
Spending capex equal to 35-45% of revenue is not unheard of: •
It seems high compared to levels in the US today (14%) but in the early 2000s, the US cable sector spent at levels similar to Televisa’s current spending levels in order to upgrade their infrastructure for high speed broadband
•
From 1996-2002, the US cable industry spent $65bn to build higher capacity hybrid networks of fiber optic and coaxial cable for broadband networks
• •
Similarly, from 1984-1992, the US cable industry spent more than $15bn on wiring the US
Televisa is in a position to deploy capital more efficiently than US peers in the early 2000s as TV benefits from learning from its US peers’ mistakes and utilizing best practices
•
Televisa’s management team is investing wisely in the cable business – they are ROI-driven and are positioning themselves to be the biggest beneficiary of a very strong secular tailwind as cable / broadband becomes as important as electricity
•
We expect capex within Televisa’s telecom business to show signs of normalizing in 2017
2000
US Cable Industry ($ in mm) 2001 2002
2014
Televisa ($ in mm) 2014 2015E
Revenue (FX adjusted)
42,116
45,477
47,898
130,424
1,574
1,858
Capex
14,600
16,100
14,500
17,805
700
824
35%
35%
30%
14%
44%
44%
Capex (% of Revenue)
Sources: Televisa company materials, UBS, and Statista.
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CMCSA Case Study – Cable & Broadband Penetration Drives Value Creation While there is no perfect case study given limited trading histories and different business mixes, we believe CMCSA is worth studying in the context of long term value creation at Televisa - Televisa already has a similar strategy to CMCSA today – having both distribution and content under one roof - We view Televisa as being a long-term compounder fueled by strong secular tailwinds that will have a place in a portfolio for years
Share Price
1988 2mm video subs
2002 22mm video subs; 3.3mm data subs AT&T deal closed
2009 Began roll-out of high speed wireless NBCU deal is announced
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Potential Long Term Value of TV’s Telecom Under an Illustrative Long Term Scenario, TV’s Telecom business could be worth more than 3x today’s valuation (not including acquisitions) by further penetrating the nascent PayTV and broadband markets in Mexico. We believe this is a realistic scenario as the Mexican economy continues to mature and become more reliant on broadband and PayTV products. Our ARPU assumption is extremely conservative at ~$36 / month for Triple Play versus ~$150+ / month in the US. Long Term
Subs
Value
Total Subscribers (mm) % growth
6.9
9.0 30%
ARPU
Current
(1)
ARPU (MXN) % growth
240
550 129%
19,872
59,400 199%
7,949 40%
26,730 45%
EBITDA Multiple EV (MXN in mm) TV Ownership EV to TV (MXN in mm) FX Conversion (MXN:USD)
9.5x 75,514 77.0% 58,145 0.07
9.5x 253,935 77.0% 195,530 0.07
Value to TV (USD in mm) Per Share (USD)
3,876 6.76
13,035 22.72
Revenue (MXN in mm) % growth
Valuation
EBITDA (MXN in mm) % margin
Assumptions - Assumes industry Pay TV penetration increases below that of the US and TV maintains its market shares. - Does not include any acquisitions. - Assumes ARPU increases to lowest tier Triple Play pricing currently available at Izzi - ~$36 / month
- Assumes 500bps of margin expansion as the new cable companies are integrated and synergies realized.
1. Current valuation is meant to be illustrative and does not tie to 2014 actuals or base case projections as we are using 2014 ending subscribers as the base (versus average 2014 subscribers or our view of 2015/2016 subscribers).
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3. SKY
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Sky TV’s stake in Sky is worth $5-6 or 11% of GCC’s Base Case Valuation Sky has experienced tremendous subscriber growth (28% CAGR since 2009) as a result of its low-priced offering while maintaining industryleading high 40%s EBITDA margins - As the macro-economic conditions improve in Mexico, there will be an opportunity to reduce churn and upsell to the premium offering -
Sky Overview •
Mexico’s leading satellite television company with 6.6mm subscribers (21.6% of Mexican HHs); also operates in Central America and the Dominican Republic
•
TV owns Sky in partnership with DirecTV (AT&T). TV is the majority owner with 58.7% ownership •
Sky Valuation (Numbers in millions, unless otherwise stated) 2012A 2013A 2014A Sky Revenue (MXN) 14,465.4 16,098.3 17,498.6 % growth 11.3% 8.7% Sky EBITDA (MXN) EBITDA Margin
6,558.0 45.3%
7,340.5 45.6%
Our diligence has shown that TV has a strong relationship with both DirecTV and AT&T. We believe that AT&T could be interested in owning TV’s stake in Sky. Given quality and
2016 EBITDA (MXN) Forward EV / EBITDA Multiple
BASE 9,681.9 8.0x
EV (MXN) TV Ownership EV to TV (MXN) 2015 FX Conversion (MXN:USD)
77,455.2 58.7% 45,466.2 0.065
future trajectory of the asset, our understanding is that TV is not a seller at this time. •
Outlook: Mid-single digit revenue growth & expanding EBITDA / FCF margins over near-to-medium term. Opportunity for ARPU growth over medium-to-long term. •
6.6mm subscribers; 28% CAGR for subscribers since 2009 – projecting mid-to-high single digit growth
•
ARPU growth dependent on macro-economic improvement in Mexico and higher per capita disposable income
•
Lower capex as replacement satellite will be finished soon
Value to TV (USD) - Base Case 2,952.4 Per Share (USD) - Base Case 5.13 Bear Case / Upside Case 3.84 / 5.73
8,211.3 46.9%
2015E 18,986.0 8.5%
2016E 20,599.8 8.5%
8,923.4 47.0%
9,681.9 47.0%
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Potential Long Term Value of Sky Under an Illustrative Long Term Scenario, Sky could be worth 80% more than today’s valuation by converting its subscriber base to postpaid plans. We believe this is a realistic scenario as the Sky product is very cheap today (~$15/month), TV has never raised prices and instead has acquired millions of entry-level subscribers that will look to upgrade as their HH income increases. Long Term
ARPU
Subscribers
(1)
Current 4.4 67%
Value 2.6 35%
Postpaid Subscribers (mm) % of Total Subs
2.2 33%
4.9 65%
Total Subscribers (mm) % growth
6.6
7.5 14%
Prepaid ARPU (MXN) % growth
123
150 22%
- Assumes no growth in current postpaid plan pricing.
Postpaid ARPU (MXN) % growth
450
450 0%
- Assumes reduced churn in prepaid subscribers (as reflected through increased price)
230
345 50%
18,216
31,050 70%
8,562 47%
15,525 50%
EBITDA Multiple EV (MXN in mm) TV Ownership EV to TV (MXN in mm) FX Conversion (MXN:USD)
7.5x 64,211 58.7% 37,692 0.07
7.5x 116,438 58.7% 68,349 0.07
Value to TV (USD in mm) Per Share (USD)
2,513 4.38
Prepaid Subscribers (mm) % of Total Subs
ARPU (MXN) % growth Revenue (MXN in mm) % growth
Valuation
EBITDA (MXN in mm) % margin
Assumptions - Assumes moderate 14% total subscriber growth. - Assumes a portion of prepaid subscribers convert to higher end postpaid plans as Mexican HH income grows
- Improved margins as price increases will drop to the bottom line
4,557 7.94
1. Current valuation is meant to be illustrative and does not tie to 2014 actuals or base case projections as we are using 2014 ending subscribers as the base (versus average 2014 subscribers or our view of 2015/2016 subscribers).
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4. CONTENT
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Content Content is worth $13-14 or 31% of GCC’s Base Case Valuation • • •
Televisa’s content business should be viewed as a stable revenue business with highly manageable costs Any macroeconomic benefit would be an upside to our valuation and should be viewed as a free call option on the Mexican economy There is also upside associated with TV’s extensive library of content (produces 90,000 hours annually)
Content Overview •
TV has three streams of content revenue: advertising, licensing and syndication, and network subscription •
Operates four broadcast networks (Channels 2, 4, 5, and 9) in Mexico and through 258 affiliated stations
•
•
Sells additional advertising on its Pay-TV and Internet assets
•
Syndicates programs to networks in 50 countries
•
Produces and distributes 24 Pay-TV brands
Televisa was built on its content business but has diversified itself so that it is not as dependent on macroeconomic factors. As recently as 2005, the content business was almost 75% of revenues – today it is only 38% excluding Univision. •
Despite challenging macro-economic and regulatory factors in the past, management has consistently shown its ability to grow advertising revenue and cut costs quickly enough to maintain mid-to-high 40% EBITDA margins
•
Outlook: Low-single digit revenue growth & flat EBITDA margins in near-tomedium term. Opportunity for mid-single digit revenue growth and expanding EBITDA margins as macroeconomic factors improve, competition within Mexico intensifies under new regulations intended to promote competition, and advertising as a percentage of GDP improves from 0.48% to global average of 1.0%.
Content Valuation (Numbers in millions, unless otherwise stated) 2012A 190.1 13.156 2,501.6
2013A 172.4 12.767 2,201.1 -12.0%
2014A 178.0 13.310 2,368.7 7.6%
2015E 161.5 15.400 2,487.1 5.0%
2016E 169.6 15.400 2,611.4 5.0%
23,935.9
24,864.5 3.9% 3,263.6 2.3% 30,329.2 2.4%
25,465.7 2.4% 2,854.4 -12.5% 30,688.8 1.2%
25,975.0 2.0% 2,997.1 5.0% 31,459.2 2.5%
26,754.3 3.0% 3,147.0 5.0% 32,512.7 3.3%
247.6 13.156 3,257.4
273.2 12.767 3,487.9 7.1%
314.0 13.310 4,179.3 19.8%
333.3 15.400 5,133.1 22.8%
364.1 15.400 5,607.9 9.2%
Total Content Revenue (Incl. Univision) (MXN) % growth
32,884.1
33,817.1 2.8%
34,868.1 3.1%
36,592.3 4.9%
38,120.5 4.2%
Total Content EBITDA (Incl. Univision) (MXN) EBITDA Margin
15,411.2 46.9%
15,566.0 46.0%
15,534.3 44.6%
16,930.3 46.3%
17,962.7 47.1%
Total Content EBITDA (Excl. Univision) (MXN) EBITDA Margin
12,153.8 41.0%
12,078.1 39.8%
11,355.0 37.0%
11,797.2 37.5%
12,354.8 38.0%
Licensing Revenue (Excl. Univision) (USD) FX Conversion (USD:MXN) Licensing Revenue (Excl. Univision) (MXN) % growth Advertising Revenue (MXN) % growth Network Subscription Revenue (MXN) % growth Total Content Revenue (Excl. Univision) (MXN) % growth Univision Licensing Revenue (USD) FX Conversion (USD:MXN) Univision Licensing Revenue (MXN) % growth
2016 EBITDA Forward EV / EBITDA Multiple EV (MXN) 2015 FX Conversion (MXN:USD) Value to TV (USD) Per Share (USD) Bear Case / Upside Case
3,189.2 29,626.7
Base Case 12,354.8 10.0x 123,548.2 0.065 8,022.6 13.95 9.23 / 18.16
Game Creek Capital
MANAGEMENT & CAPITAL STRUCTURE
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Strong Management •
Disciplined Capital Allocation. We are confident that management puts valuation first and foremost when making acquisition / divestiture decisions • While rolling up the cable industry is a focus for TV, we are confident that management will not overpay for acquisitions. It is obvious that Megacable is a likely target for TV but at these valuations, we expect TV to wait • Given the opportunity to buy the remaining 50% or sell its 50% of Iusacell, management relied solely on valuation – they were a buyer below a certain level (and already had a partnership agreement in place with Telefonica) but walked away when they deemed the valuation to be too high
•
Recent Board of Directors Nominations. TV recently nominated Mike Fries (CEO of Liberty Global), David Zaslav (CEO of Discovery), and Jon Feltheimer (CEO of Lionsgate) to its BoD • We are excited by these new additions to the Board and think they highlight (i) the quality of TV’s business and team, (ii) management’s openness to study other models, capital allocation policies, and partnership opportunities, and (iii) bring TV slightly under the ever-growing John Malone media umbrella • We expect Mike Fries will help think about appropriate capital structures to drive levered equity returns and minimize taxes • We expect David Zaslav will help TV explore content value maximization on a global scale
•
Good Operators. We appreciate management’s ability to manage costs while also investing for the future • When the macroeconomic indicators are weak in Mexico, management has shown the flexibility and foresight to immediately cut costs within the content division. They are able to do this effectively as a result of producing content in house (i.e. they are able to push a show that was originally slated for 2015 into 2016 or cancel it altogether) • Despite criticism of high capex in the cable business, management has not lost sight of the future potential of that business and the need to build now in order to be the winner over the next few decades. TV wins customers today because of its low cost offerings while investing in infrastructure in order to upgrade its customers to higher price point products in the future
•
Focused on Maximizing Shareholder Value. Management has shown they are students of the industry and study all global media business models including John Malone, BSkyB, US Telcos, etc. • We believe management is currently open to exploring shareholder return opportunities. While we do not believe they’re likely to be aggressive, we highlight their 38bn MXN cash balance and under-levered balance sheet (~1x Net Debt / EBITDA). If they were to use their cash balance for a share repurchase, they could buyback 12% of shares outstanding
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Holding Company Structure Offers Advantages • TV’s corporate structure reminds us of many of John Malone’s investment holdings (e.g. Liberty
entities) structured in a holding company format Multiple ways to win across media: broadcast, content, telecom, satellite, mobile • Investments often made through convertible debt investments opportunely timed during business, capital market or regulatory stress; emphasis on protecting downside and preserving upside • Opportunity to maximize leverage levels at subsidiaries and create greater tax shields / more efficient tax structure • Ability to upstream cash to parent for shareholder distributions and buybacks •
Televisa
Content
Cable & Telecom
Sky
Other
Publishing
100% Ownership
77% WA Ownership
58.7% Ownership
100% Ownership
100% Ownership
Advertising
Consolidated Unconsolidated
Network Subscription
Licensing & Syndication
Univision
Imagina
Ocesa
38% Ownership
14.5% Ownership
40% Ownership
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Ownership & Capital Structure Capital Structure •
Ownership
TV has a very conservative capital structure with leverage of only
•
1.2x and investment grade ratings •
TV is under-owned by US media & cable investors despite 50%+ of its value being in US-based Univision
Management acknowledges their capital structure is inefficient – they prioritize optionality but seem to be more open to exploring
•
shareholder return options
consumer goods company
(MXN in millions) Short Term Debt Long Term Debt Total Debt Cash Net Debt EBITDA Net Debt / EBITDA Ratings Interest Expense Cost of Debt
Most TV holders are Latin American generalists and treat it as a
•
3/31/2015 1,065 82,325 83,390 (44,129) 39,261 32,256 1.2x Baa1 and BBB+ 5,790 6.9%
The founder’s family trust is the single-largest shareholder with over 15% ownership
•
Other notable holders include First Eagle (5%), Gates Foundation (3%), GAMCO, Highfields, Oaktree, Citadel, Amici
Game Creek Capital
VALUATION
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TV is Undervalued Today
Content
Business Segment
Current Valuation $ Per Share Total ($mm)
Univision Licensing
15.68
9,013.7
Univision Ownership
7.16
4,117.2
Content (excl. Univision)
13.95
8,022.6
TV trades with 24% upside in our Base Case sum of the parts valuation • This SOTP is intended to be a
status quo analysis of what the business is worth today and does not include any of GCC’s anticipated catalysts • Given the highly predictable nature
9.88
5,682.4
Satellite (Sky)
5.13
2,952.4
(1)
(1.56)
(899.3)
Net Debt
(5.13)
(2,949.7)
Total
45.11
25,939.2
Current % Difference vs. Current
36.50 23.6%
20,987.5 23.6%
Distribution
Telecom
Other
1. Includes publishing, other, intersegment operations, and corporate expenses.
of the cash flows, GCC is confident in its $15.68 / share valuation of UVN’s licensing business. • This implies that the rest of the business trades at 6.0x 2014 EBITDA (assuming Univision equity value of $7.16 per share).
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TV has Traded at a Discount to Peers Over the past 4 years, TV has underperformed its US media and telco peers due to regulatory reform in Mexico and complexity of the business. GCC believes the regulatory reform in Mexico is an opportunity and has gotten comfortable with TV’s consolidated and unconsolidated interests.
Content 110.0% Satellite 97.3% Cable 90.5%
S&P 500 54.9% TV 53.9% Mexico IPC 24.4%
Note: Content peers include CBS, TWX, VIAB, FOXA, DIS, DISCA, SNI. Cable peers include CMCS, CVC, TWC, LBTYA, RCI. Satellite peers include DTV, DISH.
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45
GCC has Identified Multiple Ways to Win
Content
Business Segment
Current Valuation $ Per Share
Upside Opportunity $ Per Share
Univision Licensing
15.68
17.96 14.6% Upside
Univision Ownership
7.16
10.14 41.5% Upside
Upside Catalysts
Univision IPO in 2014 / 2015 will provide transparency into the value of TV's 38% economic ownership. Includes additional $1.50 per share in spectrum assets.
There is additional 31%+ upside, for total upside of 55%+, associated with identifiable, near-term catalysts • Near term catalysts include (i)
Distribution
Content (excl. Univision)
Telecom
13.95
18.01 29.1% Upside
9.88
11.36 15.0% Upside
TV has been consolidating the Mexican cable sector since 2006. GCC believes the company will continue to be a consolidator going forward and will eventually look to spin off their cable assets.
an expected 2015 Univision IPO and (ii) increased revenue growth and margin expansion in the Telecom business • Medium term catalysts include
Satellite (Sky)
5.13
5.73 11.6% Upside
(1)
(1.56)
Net Debt
(5.13)
Total
45.11
56.51
Current % Difference vs. Current
36.50 23.6%
36.50 54.8%
Other
1. Includes publishing, other, intersegment operations, and corporate expenses.
(i) continued consolidation to create a national cable operator and eventual spin of the business and (ii) “investor-like” allocation of capital by management • Long-term catalysts of
monetizing spectrum at Univision and potentially gaining control
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Risks to Our Thesis / Bear Case Business Segment
Distribution
Content
Univision Licensing
Current Valuation $ Per Share
Bear Case $ Per Share
15.68
12.35 -21.2% Downside
Univision Ownership
7.16
5.69 -20.6% Downside
Content (excl. Univision)
13.95
9.08 -34.9% Downside
Telecom
9.88
5.86 -40.7% Downside
Satellite (Sky)
5.13
3.84 -25.1% Downside
(1)
(1.56)
Net Debt
(5.13)
Total
45.11
30.13
Current % Difference vs. Current
36.50 23.6%
36.50 -17.5%
Other
1. Includes publishing, other, intersegment operations, and corporate expenses.
We have gotten comfortable with the risks and believe there is significantly greater upside than downside providing a comfortable margin of safety •
Mexican Regulatory Changes • We feel we understand the current regulatory environment and are comfortable with TV being allowed to operate status quo. That said, we recognize that in a developing economy starved for competition, there could always be additional regulatory action taken against Televisa • We view TV’s “dominant” positions as: • Broadcast – it’s very difficult to regulate market share within advertising (e.g. Google has ~80%+ of US desktop advertising but no actions have been taken against them) • Cable / Satellite – under current regulations, the Mexican government would need to prove that TV was anticompetitve and prove harm to consumers. It’s very difficult to prove harm when prices aren’t raised and TV is investing in infrastructure to connect the Mexican economy
•
Mexican Macroeconomy • Our thesis in no way hinges on a thriving Mexican economy (in fact we assume a status quo, slow growing economy in our base case) however, if Mexico were to go into a recession it would impact our growth projections as the population may no longer be able to afford basic connectivity given low GDP • (Note: any improvement in the Mexican economy would provide substantial upside to our model)
•
On a consolidated basis, TV is very expensive relative to Latin American peers. •
(Note: we don’t believe Latin American peers are the right comp set.)
Game Creek Capital
APPENDIX
47
Game Creek Capital
Comparable Companies
Source: Morgan Stanley as of 4/28/15.
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49
Disclaimer The analyses and conclusions of Game Creek Capital, L.P., a Delaware limited partnership (“Game Creek”), contained in this presentation are based on publicly available information. Game Creek recognizes that there may be confidential information in the possession of Grupo Televisa (the “Company”) discussed in the presentation that could lead the Company to disagree with Game Creek’s conclusions. This presentation and the information contained herein is not a recommendation or solicitation to buy or sell any securities. As of the date of this presentation, Game Creek’s client, Game Creek Fund, L.P., a Delaware limited partnership, currently beneficially owns equity securities in the Company. The Company does not represent all of the securities purchased, sold or recommended for the Company’s clients, including the Fund. The reader should not assume that the Fund’s investment in the Company was or will be profitable. The analyses provided may include certain statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the Company, access to capital markets and the values of assets and liabilities. Such statements, estimates, and projections reflect various assumptions by Game Creek concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. Accordingly, no party should purchase or sell securities on the basis of the information contained in this presentation. Game Creek expressly disclaims liability on account of any party’s reliance on the information contained herein with respect to any such purchases or sales. Game Creek manages clients that are in the business of trading – buying and selling – securities and financial instruments. It is possible that there will be developments in the future that cause Game Creek to change its position regarding the Company. Game Creek may buy, sell, cover or otherwise change the form of its investment regarding the Company for any reason. Game Creek hereby disclaims any duty to provide any updates or changes to the analyses contained herein, including, without limitation, the manner or type of any Game Creek investment.
