The next focusIR Investor Webinar takes places on 14th May with guest speakers from WS Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Remember the Keynesian beauty contest. Keynes believed that investors are pricing shares not based on what they think an asset's fundamental value is, but on what they think other investors believe is the average opinion about the value of the asset (source: Wikipedia). I think the Fool can very well represent the average opinion.
Https://www.fool.co.uk/2024/02/07/why-on-earth-have-vodafone-shares-crashed-to-a-30-year-low
Are things really as bad as the plummeting Vodafone share price suggests, though? Vodafone has a well-known brand, large customer base, and well-established footprint.
Even after the reduction, the debt level concerns me especially in an environment where interest rates are set to remain higher than they were for a long time.
The shrinking business footprint could cut both ways. On one hand it might not be a sign of a business in growth mode. Then again, focussing on fewer of the company’s big markets could help it improve performance there. That might actually help it improve its profitability.
A dividend cut is a risk. Right now, Vodafone shares offer a 12% yield – something we rarely see in the FTSE 100. But the board has not yet made a cut or signalled it intends to do so. With debt falling, there is an argument that a cut now seems less likely than a year ago.
Plus, even if the payout was reduced, it could still be above the average FTSE 100 yield.
Value in plain sight
In short, I think Vodafone shares look cheap for what they are.
The company may not face smooth sailing ahead. But I reckon that is more than reflected in the current price.
If I had spare cash to invest now, I would be happy to add more to my portfolio.
SilverSpoons, I agree with your comments. I would add that during the last 2 years inflation alone has reduced by 15% the real value of Vodafone debt, making it much more sustainable in the long run, particularly if interest rates go down.
However, I am afraid that the share price will not recover significantly without some commitment from the main shareholders. My feeling is that they are occasionally shorting the stock.
Swisscom (SCMN.VX) representatives are in Milan these days to work on a new, improved offer to be submitted to Vodafone (VOD.L) which aims at a merger of its Italian unit Fastweb and Vodafone Italia, Il Corriere della Sera said.
I agree, it wasn’t a great offer.
Besides Vodafone could receive other offers for Italy.
LONDON, Jan 31 (Reuters) - Vodafone (VOD.L) said it was pursuing other deals in Italy after it rejected a merger proposal from rival Iliad.
"We said in December that we are exploring options with several parties in Italy. We are no longer in talks with Iliad, but our discussions with others continue," a Vodafone spokesperson said on Wednesday.
I think Emirates Telecommunication Group Company (ETG), which is owned by Emirates Investment Authority (EIA) could very easily make a bid for Vodafone and then sell some assets to help financing the deal: for instance it could sell Italy to Xavier Niel.
EIA owns 60% of ETG, which has a market capitalization of 46B$ vs Vodafone’s 22.2B$. Based on 2022 data, ETG has limited debt: the figures are not very clear to me, but gross debt is between 13 and 17 B$.
With very little support from EIA, ETG could make a bid for 80% of Vodafone offering a 50% premium over current stock price. That would cost 22.2B$ x 1.5 x 80%=26.6B$. In addition, ETG would absorb Vodafone’s debt, which could be served and paid back easily just by cutting dividends.
I agree; however, considering that Vantage Towers went up 20% since March, the value attributed by the market to "all other things" went down 25% and debt was already there. I do not see clear reasons for that performance.
Hi, I’m new here. I remember a very good comment made some days ago about the valuation of Vodafone versus Vantage Towers. Following on that, the current market cap of Vantage Towers is 13.0B£; 81% of that is 10.5B£. The current market cap of Vodafone is 31.5£.
In other terms, one third of the value of Vodafone share is represented by a conservative and stable asset and two thirds by what I consider an undervalued asset.