With a lot of recent attention on BT (BT.A) and BSkyB (BSY) as the former has aggressively moved into the Sky dominated territory of sports coverage, we look at the relative valuations of the shares. BT.A, which is in our equity model portfolio, has had a good run of late, up 13.8% since our last model was run on 03.05.13, whereas BSY is down 7% over the same period.
The chart below shows the relative performance of the two shares from 27.04.12 to 28.05.13, with BT.A at a price of 313p and BSY at 798p, showing the recent dramatic out-performance by BT.A.
BT announced results, which were well received, on 10.05.13; adjusted EPS was 12% ahead of the prior year and the full year dividend was raised 14%. At the same time BT’s announcement that it was going to offer free sports coverage for customers who used its broadband was seen as a real threat to Sky, whose share price has fallen from a recent high of 899p on 18.03.13.
Our favoured approach is to look at relative valuation on the basis of the last 12 months’ reported figures; these are to 31.03.13 in the case of BT.A and to 31.12.12 re BSY.
|Market cap (£m)||24,641||12,861|
|Enterprice value (£m)||32,438||14,062|
|Adj. Op Profit/EV||10.3%||9.0%|
|Net cash flow*/EV||8.4%||8.9|
|P/e (based on adj. EPS)||11.7||14.9|
|EV/Revenue||1.8 x||2.0 x|
*Cash flow from operations less capex
Whilst the gap may be closing BT.A still looks cheaper on fundamental valuation; there are of course many other considerations to take into account when assessing the relative attractions of the shares.