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Could Grupo Televisa = Mucho Dinero?

January 30, 2009 | About:
Grupo Televisa S.A. is the largest media company in the Spanish-speaking world, and a major player in the international entertainment business. It has interests in television production and broadcasting, programming, direct-to-home satellite services, publishing and publishing distribution, cable television, radio production, show business, feature film and internet portal.

Grupo Televisa [NYSE:TV] Jan. 30, 2009 close: $13.99

52-week range: $12.99 (Oct. 24, 2008) - $28.12 (May 19, 2008)

Dividend: Varies. Last 12 months = $0.36137 = 2.58% current yield


As noted above, this company is the world leader in Spanish language media with a diverse mix of television, radio, publishing, movies and more. A multi-year court case seeking damages from Univision (which distributes content from Televisa) was recently favorably settled with Grupo Televisa to receive approximately $585 million in additional revenues from Univision between now and the contract’s endpoint in 2017.

Earnings have grown nicely since 2002’s recession. Here are the past seven years EPS (in US dollars):

2002: $0.12

2003: $0.57

2004: $0.65

2005: $1.38

2006: $1.36

2007: $1.29

2008: $1.32 - Zack’s estimate

Consensus views for 2009 and 2010 now center on $1.41/share and $1.61 taking into account both the weak economy and the added boost from the recent legal settlement.

That makes Televisa’s multiple at very reasonable 10.7x last year’s and 9.92x this year’s expected EPS. The shares now trade at less than half their 52-week high and not too far from their panic low of $12.99 hit last October 24th. A return to just 13 times this year’s estimate would bring these shares back to $18.33 or + 31% from today’s quote. Add in the current dividend and the total return looks quite appealing.

That same conservative 13 multiple on the preliminary 2010 estimate of $1.61 would lead to a target price of $20.93 within 2 years. Including expected yield that would be a 24-month total return of 50 – 60%

The Bill and Melinda Gates Foundation owned 6 million shares of TV as of September 30, 2008 as one of only 15 total stocks being held. It represented 1.9% of their total portfolio at that time.


If you like the idea but are hesitant to play due to the shaky economy here’s a low risk option combination that looks appealing right now.


………………………………...........................……..…. Cash Outlay .............……. Cash Inflow

Buy 1000 TV @ $13.99 ……....................…..………$13,990

Sell 10 Jan. 2010 $15 Calls @$2.50 …………..................................………………$2,500

Sell 10 Jan. 2010 $12.50 Puts @$2.30 ……….............................…………….....$2,300

Net Cash Out-of-Pocket ……………......................... $9,190

If TV shares climb to at least $15 [up 7.3% or better] by expiration date

(Jan. 15, 2010):


Your calls will be exercised.

You will sell your shares for $15,000.

Your $12.50 puts will expire worthless (a good thing for you as a seller).

You will have no further option obligations.

You will likely have collected $360 or more in dividends.

You will have $15,360 for your initial $9,190 outlay.

That best-case scenario would be a $6,170 gain (+ 67.1% cash-on-cash) on shares that only

needed to go up by 7.3% in 11.5 months.

If TV shares are unchanged at $13.99 on expiration date

(Jan. 15, 2010):


Your $15 calls will expire worthless.

Your $12.50 puts will expire worthless.

You will have no further option obligations.

You will likely have collected $360 or more in dividends.

You will still own 1000 shares of TV worth $13,990.

If you sold right away you could capture a gain of $5,160 (including dividends) on shares that did not go up from the day you started this transaction.

What’s the worst-case risk?

On the shares you bought at $13.99 it’s that price less the $2.50 call premium = $11.49/share.

On the puts it’s the $12.50 strike price less the $2.30 put premium = $10.20/share.

If Televisa shares went below $12.50 you could be forced to buy an additional 1000 shares for $12,500 more than your original outlay.

Your worst-case net break-even point on the whole trade would be the average of $11.49 & $10.20 = $10.85/share.

These already attractively priced shares could drop by up to 22% before you would suffer a loss.


Disclosure: Author is long Grupo Televisa shares and short TV options.

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com
http://www.TalkMarkets.com
http://www.MutualFunds.com

Visit Dr. Paul Price's Website


Rating: 3.0/5 (12 votes)

Comments

Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
Grupo Televisa S.a. Global Depositary (TV)

Bill Gates added to his holdings in Grupo Televisa S.a. Global Depositary by 20.86%. His purchase prices were between $15.19 and $17.78, with an estimated average price of $16.6. The impact to his portfolio due to this purchase was 0.34%. His holdings were 8,690,800 shares as of 06/30/2009.

Grupo Televisa S.A is the largest media company in the Spanish-speaking world and a major player in the international entertainment business. They have interests in Television production broadcasting international distribution of television programming direct-to-home satellite services publishing music recording radio production and broadcasting cable television professional sports and show business promotions paging services feature film production and distribution and dubbing. with a P/E ratio of 447.6. The dividend yield of Grupo Televisa S.a. Global Depositary stocks is 3.7%. Grupo Televisa S.a. Global Depositary had an annual average earning growth of 12.3% over the past 10 years.

Dr. Paul Price
Dr. Paul Price premium member - 5 years ago




Bill Gates added even more to his TV stake recently…

Grupo Televisa (TV)

Cascade Investment and The Bill and Melinda Gates Foundation Trust each purchased 1,723,700 global depositary shares on Oct. 26 and Oct. 27 at prices ranging from $20.03 to $20.90. Each global depositary share is traded on the New York Stock Exchange and equals 25 Series A shares, 22 Series B shares, 35 Series D shares and 35 Series L shares of Grupo Televisa, a Mexican media company.

Cascade, the private investment vehicle of Microsoft (MSFT) Chairman Bill Gates, has 3,048,012,500 A shares (2.7%), 2,682,251,000 B shares (5.1%), 4,267,217,500 D shares (5.1%) and 4,267,217,500 L shares (5.1%). The Gates foundation now owns 1,518,425,000 A Shares (1.4%), 1,336,214,000 B Shares (2.6%), 2,125,795,000 D Shares (2.6%) and 2,125,795,000 L Shares (2.6%).

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