We reiterate our long-term Neutral recommendation on
Liberty Global Inc.
). The company's fourth quarter of 2012 financial results easily
surpassed the Zacks Consensus Estimates.
Why Kept at Neutral?
Liberty Global is gradually establishing a strong foothold in
the European cable MSO market.We believe that the long-term
business fundamental of the company is very intriguing, primarily
due to strong demand for its digital cable-TV services, faster
broadband and triple-play bundled offerings.
The company is systematically conducting a share buyback
program. However, business integration risk persists as Liberty
Global has decided to acquire several companies either partially
Moreover, Liberty Global is currently trading at significantly
higher multiple with respect to several valuation metrics
compared with the industry average and the S&P 500. The stock
price has soared nearly 66% over the last year and is currently
trading at a 52-week high end.
We believe that this high level of valuation may restrict any
above market gain any time soon. Liberty Global currently has a
Zacks Rank #2 (Buy).
Risk/Reward Almost Balanced
On Feb 2013, Liberty Global entered into an agreement to
acquire 100% stake of
Virgin Media Inc.
) in a cash and equity deal. Both the companies are expecting the
deal to be completed by the second quarter of 2013, subject to
customary regulatory approval. If this deal gets approved, then
Liberty Global will become a formidable challenger to BSkyB, the
largest pay-TV operator of the U.K. and
BT Group plc.
). BSkyB is partially controlled by
On Apr 2013, Liberty Global acquired a 12.65% ownership of
Ziggo, the largest cable MSO in Netherlands. At the end of 2012,
Ziggo had more than 2.2 million digital TV subscribers, almost
1.8 million Internet subscribers and 1.5 million telephone
subscribers. A major positive for Liberty Global is that Ziggo
currently has a dividend yield of about 7.4%. Liberty Global
expects Ziggo to pay about $473.5 million to investors as
dividend in 2013.
Nevertheless, Liberty Global is predominantly operating in
Europe, which at present is economically the most vulnerable
region. Ongoing debt crisis in several European countries may
significantly affect the future prospect the company. Management
is gradually concentrating on western and northen Europe.
However, the recessionary pressure is most severe in that
BT GRP PLC-ADR (BT): Free Stock Analysis
LIBERTY GLBL-A (LBTYA): Free Stock Analysis
NEWS CORP INC-A (NWSA): Free Stock Analysis
VIRGIN MEDIA (VMED): Free Stock Analysis
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