Wall Street gave a thumbs-up to Comcast for its deal to acquire a 51% stake in NBC Universal – not to mention its simultaneous announcement that it was raising its dividend. Comcast’s stock ended Thursday up 6.5% at $15.91 on what was generally a down day for the market. Seller GE was off 0.4% at $16.00. Analysts generally had good things to say about the deal.
At Barclays Capital, analyst Anthony DiClemente said the premium that Comcast paid for NBCU was a bit higher than he had previously expected. That, he said, bodes well for the underlying value of media content or implies an embedded takeover/control premium being paid to GE – or a bit of both.
“The implied enterprise value of the new joint CMCSA/NBCU joint venture (including both NBCU and Comcast’s content assets) is roughly $37.3 billion, which implies a 2010E EV/ EBITDA multiple of 12.4x, based on the 2010E OCF (EBITDA) estimate of approximately $3.0 billion disclosed in this morning’s CMCSA presentation. This compares to an Entertainment group (DIS, VIA.B, TWX.WI, NWSA, CBS, DISCA, SNI) current weighted average EV/EBITDA multiple of 7.4x 2010E EBITDA, or a 68% premium valuation to the group,” the analyst wrote. “We estimate the equity value of the new CMCSA/NBCU joint venture to be approximately $28.2 billion, which implies a 20.1x 2010E equity P/FCF multiple, or a 46% premium to the US Entertainment P/FCF weighted-average multiple of 13.8x. This is more than double VIA.B’s 2010E P/FCF valuation multiple of 8.7x,” DiClemente noted.
“On the conference call, CMCSA management noted that 2010E estimates would likely be down Y/Y due to the rights fees associated with the February 2010 Winter Olympics on NBC (which operate at a greater loss than the Summer Olympics). We also believe the Universal film releases could prove weaker in 2010E, contributing to the decline. We would note the political advertising revenue for the 10 NBC O&O affiliates may prove to be a modest offset to the Olympics and film slate, not to mention an improving advertising backdrop. It is difficult to (literally) lateral these multiples, given this transaction can be viewed by investors as a one-time strategic effort to bolster the CMCSA portfolio. But the transaction must offer content investors some degree of legitimate affirmation of value for the cable TV networks businesses, and as such, and for myriad reasons, we remain sanguine on media & entertainment valuation headed into 2010, particularly in view of what many believe to be a firming broadcast and cable TV advertising environment,” DiClemente told clients.
Wells Fargo Securities analyst Marci Ryvicker was more upbeat as far as how the deal looks from the Comcast side. “Two big positives from this announcement, which confirm our Outperform rating, are 1) a 40% increase in CMCSA’s current dividend to $0.378 per share annually (a 2.5% dividend yield) and 2) the intent to complete its $3.6 billion buyback in 36 months.” In a second note she said that Comcast management believes the acquisition can lead to margin expansion at its cable networks due to scale and that the expertise at NBCU should help Comcast’s existing cable networks business.
