Viacom Shares Still Too Cheap?

amp9632amp160amp160amp160amp160 ActionEvent We leave our 20162017 EPS forecasts broadly unchanged post Q4 2015 earnings at 591690 previously 591689 With secular headwinds stabilizing and given substantial restructuring potential we upgrade our TP to 65 which assumes a stillmodest 11x 2016 PE previously 102x and continue to regard the riskreward going into the DISH renewal as highly attractive We remain OPamp9632amp160 amp160amp160Challenges remain but the pace of change will be slow Our thesis is Viacom39s core cable networks business faces challenges from a shrinking pay TV universe but that the pace of shrinkage is likely to be slow which will give all the players in the ecosystem time to adapt their business models With important strategic shifts from media companies on SVOD licensing we remain very comfortable with our thesis post earnings seasonamp9632amp160amp160amp160 Restructuring potential could be substantial With 20 cable networks outside the core five Nickelodeon MTV VH1 BET and Comedy Central absorbing combined programming costs of approximately 16bn pa we believe the debate about how many networks Viacom actually needs to be relevant to distributors and consumers will continueamp9632amp160amp160amp160 DISH renewal next big catalyst As we argued in our last report we believe the DISH renewal is most important near term catalyst We continue to believe the probability that DISH will drop Viacom is close to zero This suggests the risks remain skewed to the upside in our viewamp9632amp160amp160amp160 Valuation Despite the recent rally in the stock price Viacom continues to trade at very modest multiples 70x 2016 EVEBITDA 84x PEDocument Link 13 Pages 826KBThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaVillagecom MyersBizNet Inc management or associated bloggers amp160

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Viacom Shares Still Too Cheap?

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Omar Sheikh

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