Monday, December 16, 2013

Analysis of Kabel Deutschland


A German cable and internet provider

Company: Kabel Deutschland (however Vodafone now owns over 76% of the company and will most likely get the rest also...)

Business: It is/was a German cable operator with offers of digital, high definition (HD) and analog TV, Pay TV and DVR offerings, Video on Demand, broadband Internet, WiFi and fixed-line Phone services via cable as well as mobile services.

Active: Germany

P/E: 34.6

contrarian values of P/E, P/B, ROE as well as dividend
The P/E of Kabel Deutschland is extreme with 34.6, which seems to a large extent come from that Vodafone is buying it, and for the first time ever since I started to analyse companies I ran into one with a negative equity... this of course leads to a lot of strange figures and to be frank will lead to a completely uninteresting investment. So the P/B ends up at -5.8 which leads to a big no, no from Graham. The earnings to sales are not so bad since it is at 13%. ROE as well as book to debt gives negative values so no need to bring that up. In the last five years they have had an excellent yearly growth of 6% per year which leads to a motivated P/E of around 16 to 20 which means that today Kabel Deutschland is being traded at double the motivated price. They pay a dividend in the size of 2.6% so ok but not more and this does however represent 90% of their earnings so improvements will be small if any.

Conclusion: I as well as Graham see no reason to step into this company. The price of it has been very much pushed up due to the deal with Vodafone to levels that are unrealistic. Vodafones offer to the shareholders were however 87 € per share so today it is well beyond that but as I mentioned this is unrealistic. I will keep my fingers away from this company and will if anything at another moment take a look at Vodafone.

If this analysis is outdated then you can request a new one.

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