V - Vivendi Universal ADS

**Bernard2222** Sat Apr 01, 2006 4:46 pm

V - Vivendi Universal ADS
Here is a stock that I think is worth looking at.

Profile
Vivendi Universal, S.A. operates as a media and telecommunications company. Its Media business includes Canal+ Group, Universal Music Group (UMG), and Vivendi Universal Games (VUG). Canal+ Group consists of two businesses, which include pay-TV channel production in France with Canal+ channel and theme channels, and pay-TV channel distribution terrestrially through satellite, cable, or ADSL; and production and distribution of films and television programs through StudioCanal, an European studio. UMG acquires, manufactures, markets and distributes recorded music, as well engages in the music publishing market in order to license for use in recordings and related uses, such as films, advertisements, or live performances. VUG develops, publishes, and distributes multiplatform interactive games. Its games portfolio of development studios and publishing labels includes Blizzard Entertainment, Radical Entertainment, Sierra Entertainment, and Massive Entertainment. The company’s telecommunications business includes SFR Cegetel Group and Maroc Telecom. SFR Cegetel Group provides mobile and fixed-line telecommunication services in France. Maroc Telecom offers mobile telephony services for residential, professional, and corporate customers in France, as well as in the French overseas territories, Reunion and Mayotte. Vivendi Universal operates primarily in France, the United States, and other countries in Europe. The company was founded in 1853 and is based in Paris, France.

Numbers
Market Cap: 37,110,777
Curr. Price: 34.20

Free Cash Flow: 4,413,000
Enterprise Value: 42,937,000
EV Yield: 10,28%

ROE: 22.04%
ROIC: 17.14%
Net Margin: 17.52%

P/E: 8.28 vs 26.20 (industry)
P/E Forward: 14.07 vs 19.20
P/Book: 1.72 vs 2.8

I'll have to look deeper into their annual reports but it seems to me that at this price, it could be a buy. Anyone else has an opinion on this one?

**DonQuixote** Sun Apr 02, 2006 2:52 pm

I ran an online DCF calculator using this page: http://www.focusinvestor.com/scripts.html

Initial Cash Flow: 4413000
Growth Rate (Years 1-5): .17
Growth Rate (Years 6-10): .08
Margin of Safety: .40
Terminal Growth Rate: .03
Discount Rate: .15
Shares Outstanding: 1150000
Long Term Debt: 7571056
------
Results:
Intrinsic Value: $57.25
Margin of Safety IV: $34.35

Let me know if anything seems off. So, does it mean that this is a buy seeing as the Margin of safety price is pretty close to its actual price?

**Bernard2222** Sun Apr 02, 2006 3:20 pm

Hi Don,

This valuation seems about right to me although I think I would use growth and discount rates that are a bit lower. Buffett suggests a margin of safety of 40% or higher I believe and this is pretty much what your calculations arrive at, so I think this would be good enough to consider it a buy DCF wise.