Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/vivendi-sa" target="_blank" rel="noopener" data-smartkarma-citation="entities:21076:1">Vivendi SA (VIV FP)</a> just posted another<a href="https://www.vivendi.com/wp-content/uploads/2019/10/PR191017-Vivendi-Q3-2019-revenues.pdf" target="_blank" rel="noopener"> strong set of 3Q results</a> which highlight the attractiveness of UMG, the company's crown jewel. UMG saw YoY revenue growth of 20.4% to 1.8 billion EUR led by the continued success of music streaming globally. The YoY period was tough as 3Q18 had been a very strong quarter showing 38% growth vs 2017.
Importantly, Vivendi announced that the 10% minority investment by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a> in UMG would be concluded in the coming weeks. UMG will be valued at 30 billion EUR and Tencent has a call option to acquire an additional 10% on the same terms over the coming 12 months.
The entire market cap of Vivendi is currently 30.5 billion EUR indicating the disconnect between Vivendi's share price and its true underlying value. Surely its ownership of Canal+ and minority stakes in other publicly listed companies such as <a href="https://www.smartkarma.com/entities/telecom-italia-sp-a" target="_blank" rel="noopener" data-smartkarma-citation="entities:21075:1">Telecom Italia Sp A (TIT IM)</a>, <a href="https://www.smartkarma.com/entities/mediaset-spa" target="_blank" rel="noopener" data-smartkarma-citation="entities:21207:1">Mediaset SpA (MS IM)</a>, <a href="https://www.smartkarma.com/entities/gameloft-se" target="_blank" rel="noopener" data-smartkarma-citation="entities:21477:1">GameLoft SE (GFT FP)</a>, <a href="https://www.smartkarma.com/entities/havas-sa" target="_blank" rel="noopener" data-smartkarma-citation="entities:21482:1">Havas SA (HAV FP)</a> and <a href="https://www.smartkarma.com/entities/spotify-technology-sa" target="_blank" rel="noopener" data-smartkarma-citation="entities:26772:1">Spotify Technology Sa (SPOT US)</a> is not worth virtually nothing.
We also learned that Vivendi is in talks with other strategic investors to buy additional minority stakes of UMG at the same valuation. All cash received by Vivendi will be used to buy back shares. Vivendi has bought 1.3% of its shares outstanding between August and mid-October. We should expect buybacks to continue and its maximum buyback price of 25 EUR to be lifted going forward. <a href="https://www.smartkarma.com/entities/bollore-sa" target="_blank" rel="noopener" data-smartkarma-citation="entities:21405:1">Bollore SA (BOL FP), the investment holding of Vincent Bollore, owns 26.3% of Vivendi. Continued buybacks will increase the stake of Bollore in Vivendi which is the eventual end goal.</a>
Why has Vivendi not performed better over the past 24 months given the attractiveness of UMG? Vivendi's UMG stake is the crown jewel but discussions about its valuation range have been far and wide. The entry of Tencent, and other strategic investors, finally puts a firm valuation on UMG. Additionally, Vivendi has been continuously fighting with some of its partners in investments such as <a href="https://www.smartkarma.com/entities/telecom-italia-sp-a" target="_blank" rel="noopener" data-smartkarma-citation="entities:21075:1">Telecom Italia Sp A (TIT IM)</a> and <a href="https://www.smartkarma.com/entities/mediaset-spa" target="_blank" rel="noopener" data-smartkarma-citation="entities:21207:1">Mediaset SpA (MS IM)</a>. Investors are probably worried that Vivendi is a troublemaker and won't get along with the new investors coming into UMG.
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Minority investors would be wise to look through the noise and remember one date: 17/02/2022. This is the publicly announced date that Vincent Bollore will hand over his empire to his children. Historically, Bollore is often two steps ahead of investors and betting against him has rarely been a rewarding proposition. Bollore will want to end his reign on a high note and will strive to extract maximum value by early 2022.
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SOTP analysis of Vivendi easily gets a price target of 32 EUR, or 30% upside from current levels. The downside is protected by the continued share buyback program.

Vivendi SA (VIV FP) just posted another strong set of 3Q results which highlight the attractiveness of UMG, the company's crown jewel. UMG saw YoY revenue growth of 20.4% to 1.8 billion EUR led by the continued success of music streaming globally. The YoY period was tough as 3Q18 had been a very strong quarter showing 38% growth vs 2017.
Importantly, Vivendi announced that the 10% minority investment by Tencent Holdings (700 HK) in UMG would be concluded in the coming weeks. UMG will be valued at 30 billion EUR and Tencent has a call option to acquire an additional 10% on the same terms over the coming 12 months.
The entire market cap of Vivendi is currently 30.5 billion EUR indicating the disconnect between Vivendi's share price and its true underlying value. Surely its ownership of Canal+ and minority stakes in other publicly listed companies such as Telecom Italia Sp A (TIT IM), Mediaset SpA (MS IM), GameLoft SE (GFT FP), Havas SA (HAV FP) and Spotify Technology Sa (SPOT US) is not worth virtually nothing.
We also learned that Vivendi is in talks with other strategic investors to buy additional minority stakes of UMG at the same valuation. All cash received by Vivendi will be used to buy back shares. Vivendi has bought 1.3% of its shares outstanding between August and mid-October. We should expect buybacks to continue and its maximum buyback price of 25 EUR to be lifted going forward. Bollore SA (BOL FP), the investment holding of Vincent Bollore, owns 26.3% of Vivendi. Continued buybacks will increase the stake of Bollore in Vivendi which is the eventual end goal.
Why has Vivendi not performed better over the past 24 months given the attractiveness of UMG? Vivendi's UMG stake is the crown jewel but discussions about its valuation range have been far and wide. The entry of Tencent, and other strategic investors, finally puts a firm valuation on UMG. Additionally, Vivendi has been continuously fighting with some of its partners in investments such as Telecom Italia Sp A (TIT IM) and Mediaset SpA (MS IM). Investors are probably worried that Vivendi is a troublemaker and won't get along with the new investors coming into UMG.

Minority investors would be wise to look through the noise and remember one date: 17/02/2022. This is the publicly announced date that Vincent Bollore will hand over his empire to his children. Historically, Bollore is often two steps ahead of investors and betting against him has rarely been a rewarding proposition. Bollore will want to end his reign on a high note and will strive to extract maximum value by early 2022.

SOTP analysis of Vivendi easily gets a price target of 32 EUR, or 30% upside from current levels. The downside is protected by the continued share buyback program.  

Vivendi (VIV FP Equity): All About UMG. Bet on Vincent Bollore to Create Maximum Value by 17/02/22

France

Gameloft SE is a global publisher of digital and social games.  The Company creates games for all digital platforms including mobile phones, smartphones and tablets, set top boxes, connected televisions and consoles.  With a presence across all continents, Gameloft partners with international brands in addition to operating its own established franchises.

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Vivendi (VIV FP Equity): All About UMG. Bet on Vincent Bollore to Create Maximum Value by 17/02/22

Vivendi SA (VIV FP) just posted another strong set of 3Q results which highlight the attractiveness of UMG, the company's crown jewel. UMG saw YoY...

Nicolas Van Broekhoven