Sunday, November 20, 2011

Vodafone –Verizon wireless dividend and emerging market growth creates 32% upside

This article is a summary of what I read online. The valuation, like those published exclusive on seeking Alpha, is not mine.

Vodafone Group Plc (ADR) - Currently trades at 26.96$
Potential Upside by Industry Estimates:  $8-$10. Including dividends, the total return could top 35%
Market Capitalization: $136B
Cash: 12.20$; Total debt: $42B
Shares Outstanding: Approximately 5B
Sector: Services; Industry: Communications Services
Main Catalyst: Potential future regular dividend from Verizon wireless, growth emerging market growth, increase in dividend yield
Trading timeline: 24 months

What does Vodafone do?
Vodafone Group Plc (Vodafone) is a mobile communications company operating across the globe providing a range of communications services. The Company offers a range of products and services, including voice, messaging, data and fixed-line solutions and devices to assist customers in meeting their total communications needs. Vodafone has a global presence, with equity interests in over 30 countries and over 40 partner markets worldwide. It operates in three geographic regions: Europe, Africa and Central Europe; Asia Pacific, and the Middle East, and has an investment in Verizon Wireless in the United States. In October 2010, Vodafone Global Enterprise, the business within Vodafone, announced the acquisition of two telecom expense management (TEM) companies, Quickcomm and TnT Expense Management. In November 2011, the Company sold 24.4% interest in Polkomtel in Poland.

Despite a defensive profile that should serve investors well in volatile markets, shares of British mobile-network operator Vodafone have been weighed down with the negativity that has burdened many European stocks as the sovereign-debt crisis rolls on.

Potential Catalyst:

·         Vodafone (VOD) received its best news in years on July 28—the announcement of a 2012 $4.5 billion special dividend from Verizon Wireless, of which it owns 45%—its stock  has risen 4%. But over the past 12 months, it's underperformed the market slightly. It's also badly trailed shares of Verizon (VZ), which owns the other 55% of Verizon Wireless—even though the mobile-communications outfit is each company's most important asset.
·         The decision by Verizon Wireless (VZW) to pay a special $10B dividend in January is a watershed event. Vodafone will pass its portion along to shareholders, leading to a total dividend of $2—and a 7.5% yield—per American depositary receipt. Best of all, a big payout is likely to become an annual and growing event.
·         divesting smaller, unstrategic minority interests in France, China and some other markets
·         VOD is No. 1 or No. 2 telecom service provider in fast-growing Turkey, India and Egypt, as well as South Africa and other sub-Saharan nations. Countries like these already generate over 25% of Vodafone's Ebitda. When VZW's strong results are included, less than half of Vodafone's Ebitda comes from mature European markets.
·         Revenue from mobile data, rising at more than 20% annually, and from messaging, climbing at an 8% yearly clip, easily are outrunning the drop in voice revenue. And earnings are expected to rise about 8% in the company's next fiscal year, which starts on April 1.
·         Last week, Vodafone reported that revenue in its fiscal 2012 year's first half, ended Sept. 30, had risen 4%, to £23.5 billion, while basic earnings per share had slid 9%, to 13.06 pence (21 cents), mainly because of higher taxes and because the comparable fiscal 2011 stretch included a large extraordinary gain on the sale of China Mobile.
·         While there's no formal annual commitment, Verizon Wireless has little net debt and produces about $1 billion monthly in Ebitda. "Absent massive investment, VZW could pay out a regular annual dividend.

Sunday, November 13, 2011

Equifax - New products and strategy to provide potential upside of 25%

This article is a summary of what I read online on Barron's. I thought this was interesting to point to readers looking to play financial services. The valuation, like those published exclusive on seeking Alpha, is not mine..
  • Equifax Inc.(EFX) - Currently trades at $36.16
  • Potential Upside by Industry Estimates: Approx. $8 per share
  • Market Capitalization: $ 4.38B
  • Cash: $102M; Total debt: $1.04B
  • Shares Outstanding: Approximately 121M
  • Sector: Financial; Industry: Credit Services
  • Main Catalyst: New product called Decision 360; revenue diversification leading to growth even in recessionary markets; emerging market growth; Fundamentals
  • Trading timeline: 12 to 18 months

What does EFX do?

Equifax a provider of information solutions for businesses and consumers. The Company has a group of clients and customers, including financial institutions, corporations, governments and individuals. Its products and services are based on databases of consumer and business information derived from various types of credit, financial, employment and income, public record, demographic and marketing data. It operates in three regions: North America, Europe (the United Kingdom, Spain and Portugal) and Latin America (Argentina, Brazil, Chile, Ecuador, El Salvador, Honduras, Paraguay, Peru and Uruguay). It operates in five segments: the United States Consumer Information Solutions (USCIS), International, TALX, North America Personal Solutions and North America Commercial Solutions. In March 2011, it acquired Workload Financial Business Consultants Limited. In August 2011, the Company acquired DataVision Resources. In September 2011, it acquired Datum.


The Atlanta-based database outfit has been compiling information on the creditworthiness of individuals for more than a century, offering its insights mostly to lenders. After the stock topped at $46.26 in 2007, financial performance peaked in 2008. In 2008, revenue topped out at $1.94 billion with $2.48 a share in profits; revenue slid to $1.82 billion in 2009 when earnings dropped to $2.33 a share. The shares hit bottom in 2009 at $19.79.

Some of the potential revenue drivers:
·         Revived appetite for debt is a big propellant for Equifax's business. Total U.S. consumer debt recently hit $11.2 trillion, a little more than the $11.1 trillion posted before the recession hit, according to Equifax's own National Credit Trends report.
·         Trends in home and car sales leading to less demand for credit reports

Facts to know:
·         In all, the company has introduced 137 new products and services over the past two years, according to Boyar's Intrinsic Value Research.

Potential Positives:
·         Even before the recession, Equifax had begun to launch products and services that broadened its picture of consumers and expanded its potential market beyond banks and a few other, mostly U.S.-based customer categories. In 2007, EFX purchased TALX, a company that gathers employment and income information about individuals. It can combine this data with that of another purchase, IXI, which gathers wealth data based on zip code. The two companies contribute to a new product called Decision 360°, an attempt at a more granular portrait that may be of use to small businesses, auto lenders, banks and insurers.
·         Goal to generate 10% of our revenue from new products generated within the last three years. EFX crossed that threshold last year. CEO is a former senior executive at General Electric who's been chairman and CEO since late 2005. The diversification, reducing reliance on mortgage-related business, has enabled Equifax to "weather the storm better," he notes.
·         Diversification lead EFX to beat Street expectations by 1 cent a share. Despite a double-digit decline in mortgage activity, revenue increased to $490 million, up from $474 million in the year-earlier quarter, an 8% increase. Analysts expect EPS to grow from $2.52 a shareon revenue of $1.95B to $2.73 a share on $2B in 2012.
·         According to industry, stock trades relatively cheap—about 13 times projected 2012 earnings, well below its 10-year median of 15.2 times. Another basis of comparison: Private-equity fund Madison Dearborn bought effective control of rival TransUnion for an implied 9x EV/ Ebitda in 2010. Equifax trades at 8.5x.
·         EFX strains against the same headwinds as consumers, but technological gains in an era of real-time data and new customers are helping it push forward. Smith envisions new types of clients, like health-care providers who want to verify a patient's identity and confirm that he has the right medical benefits before admitting him; or a merchant who wants added information before approving a credit-card charge at the cash register. Mobile devices like smartphones open up other opportunities.
·         Private-equity firm Veronis Suhler Stevenson projects a 6.5% average compound growth rate for business-information providers like Equifax over the next five years. "Equifax is one of the largest players in a little-known but fast-growing part of the trillion-dollar communications industry," says John Suhler, a founding partner.
·         Equifax has only just started to tap the possibilities in emerging economies with burgeoning middle classes, such as Russia, Brazil and India. It recently joined up with Boa Vista, Brazil's second biggest credit bureau. At present, the company gets just 29% of its profits overseas.

Equifax's price/earnings ratio is near the bottom of business-information providers.

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*All earnings per share and P/E estimates are on a calendar- year basis except for Experian. EPS and P/Es for Experian are for the March 2012 and March 2013 fiscal years.
Source: Thomson Reuters