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.
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.
