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EM.TV - Underperformer (Merck Finck) EM.TV: Attempting to regain investor confidence (company visit) Valuation based on sparsely available figures results in a fair value of €6.76 p.s. After last week’s profit warning of EM.TV and the statements concerning the restructuring of the company, our first visit to EM.TV showed indeed a company in the phase of deep restructuring. Due to the expected deals with the Kirch group, our estimates are likely to be revised at the latest in the course of the presentation of EM.TV’s year-end figures in March 2001. We based our valuation on the unsatisfactory reporting quality regarding the current situation of EM.TV. Our Cash Flow Discount model results in a fair value of €7.7 per EM.TV share. As we expect a negative result for the current FY and a slightly negative result in the next FY, our Earnings Discount model calculates a fair value of €3.6 p.s.. Our assumptions are: Discount interest rate of 13.2% and a growth of 15% in the first phase. We used a third approach, based upon a sum of the parts valuation, which resulted in a fair value of €9.0 p.s.. Our sum of the parts considers EM.TV’s share in Constantin, its Jim Henson share as well as a 25% share in the Formula 1 Holding SLEC (post Kirch deal) and 100% of Junior-TV (post Kirch deal). We did not take into account the 45% stake in TMG. The average of our three approaches indicates our current fair value for EM.TV, which is at €6.76 p.s. Significant questions to be resolved in the near term In order to regain investor confidence we consider the following points of significant importance: . Will the solution based on the Kirch deal be transacted in the near term? . Is the liquidity situation of EM.TV secured, even when executing the call option for the next 25% of SLEC (see details below)? . Will the 45% share in TMG be sold in the near term and at what price? . Will a group of car producers take over a share in SLEC and on what conditions? . When will EM.TV break even and on which cost structure? Finding a financial solution for the takeover option for additional 25% in SLEC We expect these important questions to be resolved at the latest until the company’s presentation of its year end figures. We consider the probability for the implementation of the Kirch share in EM.TV as very high. In the course of this share the financing of the additional 25% share in SLEC is likely to be secured through Kirch, who wants to receive the Formula 1 broadcasting rights for his Pay-TV-channel Premiere. We expect EM.TV and Kirch to find a financial solution for the purchase of these 25% in the near term, because EM.TV’s call option for this share expires on 27.02.01 at a price of $985m. Ecclestone`s put option starts in May 2001 and expires three years later If the call would not be executed by EM.TV, Ecclestone, the holder of the other 50% share in SLEC, has a Put Option for the 25% SLEC share, starting in May 2001 and expiring three years later at an execution price of $996m. A third possible solution to exit these options is the entrance of the car producers into the SLEC negotiations. If a strong foundation for the co-operation between the car constructors, Ecclestone, Kirch and EM.TV is found, this might be the best way for EM.TV to get out of liquidity problems and keeping the merchandising rights for Formula 1. At what price and when will the 45% TMG share be sold and to whom? Moreover we expect EM.TV to find a solution for the sale of the 45% stake in Tele Muenchen Group (TMG). Based on the sale of the TV channel tm3, the price for TMG will be lower than the €409m EM.TV had paid before. If a price agreement with Mr. Kloiber, CEO of TMG cannot be achieved, we consider the sale of the TMG share to a third party as likely. Regaining investor confidence will be tough Finally the new structure of EM.TV, the presentation of their year end figures and the outlook for the next years together with a realistic business plan will be crucial for EM.TV’s future share price development. The current situation is characterised by a high uncertainty about EM.TV’s future. Based on our valuation approach and this uncertainty we consider the current share price of EM.TV as reflecting the company value. Until the uncertainty is cleared away EM.TV’s management, the share should underperform the market. It will be a tough job to regain investor confidence. (Quelle: Merck Finck) 13.12.2000 12:08 |
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| aus der Diskussion: | EM.TV "... a fair value of €3.60..." |
| Autor (Datum des Eintrages): | combiz (13.12.00 16:15:31) |
| Beitrag: | 1 von 15 (ID:2522925) |
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