Monday 13 January 2014

Analysis of RTL group

A Luxembourg broadcasting company

Company: RTL Group

Business: A Luxembourg situated TV & broadcasting company that are traded on MDax in Germany. They have three legs to stand on: TV & Radio (Own today 54 TV channels and 28 Radio stations), Content Production (9,200 hours of TV programs in 62 countries, with several prime time shows) and finally Independent Rights Management (sale of over 20,000 hours of material to over 150 countries, including licensing of gaming, online, mobile and social media)

Active: All over Europe with TV and Radio and all over the world with sale of their produced products.

P/E: 25.3

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of RTL Group is very high with 25.3 and the P/B is not much better with 3.5 which means that Graham would not find it of interest. They do however have a pretty nice earnings to sales since it is at 10% and the ROE is ok with almost 14%. The ratio of the book to debt is also great with 1.4. In the last three years they have had a yearly growth of 0.8% which is very bad and this then also gives us a motivated P/E of 8 to 10 which means that the stock is highly overvalued by the market today. The reason for that is probably due to that they pay a very nice dividend of 5.2% which however represents 132% of their earnings. In the last three years they have paid out more in dividends then their earnings but based on the book to debt they can keep doing that for some time still but that is also the only reason I can see for why it is valued so high today by the market.

Conclusion: Media has and will for a long time longer be a very interesting field however the price one would be forced to pay for being a shareholder in the RTL Group is just too high for being of interest to both me and Graham. I must admit that the dividend is looking nice but if one wants that there are more solid companies paying out nice dividends that represents less then the company earnings.

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