Understanding TSR and how we all contribute to it

Transcription

1 Understanding TSR and how we all contribute to it Razón TEF Finance social

2 Key drivers of total shareholder returns (TSR) TSR Formula F Key drivers that explain TSR FUNDAMENTALS Share Price appreciation REVENUE growth MARGIN improvement S SUSTAINABILITY TSR VALUATION MULTIPLE change CF CASH FLOW USE Dividend yield NET DEBT variation NUMBER OF SHARES change DIVIDEND payment Corporate Strategy Telefónica SA 2

3 Telefonica s relative performance over the PIP cycles TEF Share Price ( ) Trailing 3 weekday average share price PSP 26 1% Paid PSP 27 1% Paid PSP % Paid PSP 29 % Paid PSP 21 % Paid PIP 211 % Paid CURRENT PIPs (as of Sept. 19 th ) PIP % Paid 9.53 PIP 213 % Paid 1.26 PIP 214 % Paid PIP 215 Currently % Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Corporate Strategy Telefónica SA 3 1. Data as of 19/9/217 Source: Bloomberg

4 Long term fundamentals are the key drivers of TSR but portfolio and financing decisions plus macro also matter Positive Contribution to TSR Negative Contribution to TSR F S CF FUNDAMENTALS SUSTAINABILITY CASH FLOW USE DEBT SHARES DIVIDEND A ASSET purchases? (higher revenues) (depends on price) (financed with debt and/or equity) B ASSET divestitures (lower revenues)? (depends on price) (cash lowers debt) C Δ EQUITY (# shares) (buybacks vs new issues) D DIVIDEND payment (cash dividend) E ΔFX (local vs ) ( lower vs. higher) ( lower vs. higher) F Δ INTEREST RATES (lower or higher) 4

5 TEF- consensus view of P&L, valuation and balance sheet Revenues ( Bn) ( Bn) OpFCF Margin-OpFCF Y FWD 2Y vs. 1Y +.8% ( Bn) OpFCF 1Y FWD OpFCF 2Y FWD 1Y FWD 1Y LTM +4.2% 35 OpFCF 1Y LTM OpFCF 2Y vs. 1Y +6.7% +6.% 3 PIP 214 PIP ( Bn) OpFCF Mg Mg. LTM +.4 p.p % 25% 2% 15% 1% 5% % EV/OpFCF Min. 7.2x (Feb-9) PIP 214 1Y LTM -1.6x Max. 14.1x (Nov-15) Avg. 9.8x Δyoy EV/OpFCF +.1x +.1x -.2x +1.x +1.6x +1.7x -1.2x -.7x 1.7x Sept EV ( Bn) ( Bn) EV PIP 214 Mkt Cap Net Debt Data as of 18/9/217 Source: Bloomberg

6 TEF TSR 12M rolling and breakdown by drivers (OpFCF) TSR 12M rolling F S CF LTM 1 +14% +6% +6% -14% -1% +1% % -6% -18% +3% +2% -13% -28% -6% +16% -18% -2% +23% +16% +19% -26% +4% +7% +29% -41% +28% +5% -8% +2% -17% -9% -6% +13% 217 YTD -14% +6% +5% 6 1. Data as of 18/9/217 LTM= Last Twelve Months Source: Bloomberg

7 Interesting case studies 7

8 Apple key historical consensus figures (1Y&2Y FWD) Revenues Y FWD 2Y vs. 1Y +2.1% 1Y FWD 1Y LTM +16.6% OpFCF Margin OpFCF OpFCF 1Y FWD OpFCF 1Y LTM +13.4% OpFCF 2Y FWD OpFCF 2Y vs. 1Y +2.7% OpFCF Mg Mg. LTM -.7 p.p % 35% 3% 25% 2% 15% 1% 5% % EV/OpFCF Max. 15.2x (Sept-9) 1Y LTM +3.6x 8 EV EV Mkt Cap Net Debt x Sept Avg. 8.1x 2 3 Min. 3.6x (April-13) Δyoy -5.2x -2.8x -.1x +1.5x +.7x -2.4x +1.2x +2.1x Data as of 18/9/217 Source: Bloomberg

9 Apple TSR 12M rolling and breakdown by drivers (OpFCF) TSR 12M rolling F S CF LTM 1 +41% +19% +1% +12% YTD +78% -34% +5%-32% +1% +53% +32% +4% +32% +8% +11% +5% +8% +17% +4% +26% -4% +14% +9% -8% +16% -27% +9% -3% -12% +7% +12% +17% +1% +7% +4% +23% 9 1. Data as of 18/9/217 LTM= Last Twelve Months Source: Bloomberg

10 Amazon key historical consensus figures (1Y&2Y FWD) Revenues Y FWD 2Y vs. 1Y +21.1% 1Y FWD 1Y LTM +25.5% OpFCF Margin OpFCF OpFCF 1Y FWD OpFCF 1Y LTM -.8% OpFCF 2Y FWD OpFCF 2Y vs. 1Y +47.9% OpFCF Mg Mg. LTM -1.7 p.p 1% 8% 6% 4% 2% % EV/OpFCF Max. 16.2x (Feb-12) 1Y LTM +7.9x Avg. 41.1x 35.3x Sept.-17 EV Mkt Cap Net Debt 2 5 Min. 14.9x (Jan-9) Δyoy +.9x +39.7x -7.x -4.2x -13.7x -6.5x -1.2x +9.9x EV Data as of 18/9/217 Source: Bloomberg

11 Amazon TSR 12M rolling and breakdown by drivers (OpFCF) TSR 12M rolling F S CF LTM 1 +33% +28% -2% -3% YTD +27% +5% +2% +34% -96% +94% -2% -4% +63% -16% -2% +45% +59% -1% +1% +59% -2% -2% % -22% +148% -31% +1% +118% +39% -3% +2% +11% +% +33% -1% +32% Data as of 18/9/217 LTM= Last Twelve Months Source: Bloomberg

12 Disney key historical consensus figures (1Y&2Y FWD) Revenues Y FWD 1Y FWD 2Y vs. 1Y 1Y LTM +3.7% +1.3% OpFCF Margin OpFCF % OpFCF 1Y FWD OpFCF 1Y LTM +2.6% OpFCF 2Y FWD OpFCF 2Y vs. 1Y +4.1% OpFCF Mg Mg. LTM +.3 p.p 3% 25% 2% 15% 1% 5% EV/OpFCF Min. 6.2x (March-9) EV Y LTM -1.4x EV Mkt Cap Max. 16.x (Nov-15) Avg. 11.8x 12.x Sept.-17 Net Debt Δyoy -.5x -.5x -.1x +3.7x +.9x -.5x -1.x -1.2x Data as of 18/9/217 Source: Bloomberg

13 Disney TSR 12M rolling and breakdown by drivers (OpFCF) TSR 12M rolling F S CF LTM 1 +8% +4% +3% +1% +18% % +4% +18% +4% -8% +5% +2% +34% -3% +3% +34% +8% +5% +42% +55% +13% +8% +4% +25% +16% -5% +2% +13% +4% -7% +4% +1% +4% 217 YTD +1% -1% -5% Data as of 18/9/217 LTM= Last Twelve Months Source: Bloomberg

14 Comcast key historical consensus figures (1Y&2Y FWD) Revenues Y FWD 1Y FWD 2Y vs. 1Y 1Y LTM +4.4% +8.1% OpFCF Margin OpFCF OpFCF 1Y FWD OpFCF 2Y FWD 12 OpFCF 1Y LTM OpFCF 2Y vs. 1Y Mg. LTM 35% % +4.6% +.3 p.p 3% % 2% % 4 1 1% 2 5% % OpFCF Mg EV/OpFCF Δyoy Min. 5.7x (Aug-11) -.1x -1.4x +1.4x +3.x +.3x -.8x 1Y LTM +.7x Max. 13.3x (Jun-17) Avg. 9.5x 11.8x Sept x -.3x EV Mkt Cap Net Debt Data as of 18/9/217 Source: Bloomberg EV

15 Comcast TSR 12M rolling and breakdown by drivers (OpFCF) TSR 12M rolling F S CF LTM 1 +14% +13% +% -1% YTD +25% % +9% +33% +48% -32% -6% +1% +11% +36% +14% +61% +9% +47% -14% +42% +7% +3% +3% +13% +7% -7% % -1% +6% +22% -3% +25% +11% -4% +1% +8% Data as of 18/9/217 LTM= Last Twelve Months Source: Bloomberg

16 Current PIP plans 16

17 Current status of PIP Plans as of September 19 th, 217 PIP-TFSP 214 PIP-TFSP

18 PIP-TFSP 214 (% Paid) 18

19 TSR drivers for Top-5 Telcos Average TSR Top-5 (Total Return for 3 Years) From to TSR (3Y Total Return) F -6.1% 35.8% -8.2% S -3.1% Ranked #8 out of 15 CF +1.% Ranked #7 Revenue EBIT Margin EV / EBIT Multiple Cash Flow Use TSR (Cumulated) FUNDAMENTALS F S CF Average total TSR from KPN, Deutsche Telekom, Orange, Proximus and Telenor NOTE: TSR is not weighted by average market capitalization and it is calculated in Local Currency 19 TSR is calculated considering the dividend yield and the share price appreciation/loss between the 1 st of October, 214 and the 18 th of September, 217. Source: Bloomberg

20 Most of the best 3Y TSRs were due to improved Fundamentals and Sustainability (4 out of 15 companies) PIP-TFSP 214 Fundamentals + Sustainability contribute positively to TSR 8 Fundamentals + Sustainability + 4 Fundamentals Sustainability + 1 TSR > 9 F + S > Fundamentals + Sustainability All analyzed companies 15 F + S + CF > Financial mgmt drives TSR in spite of negative fundamentals + sustainability 1 F + S < 3 TSR < 6 2 TSR is calculated considering the dividend yield and the share price appreciation/loss between the 1 st of October, 214 and the 18 th of September, 217. Source: Bloomberg

21 ANNEX 21

22 Glossary Capital Gain / (Loss) Capital Gain = (Share price end Share price begin ) / Share price begin Dividend yield Dividend Yield = Dividend paid / Share price begin Revenue growth Revenue or turnover is the income that a company receives from its normal business activities, usually from the sale of goods and services to customers Revenue growth = (Revenue end Revenue begin ) / Revenue begin EBIT Margin Earnings before interest and taxes (EBIT) is a measure of a firm's profit that includes all expenses except interest and income tax expenses EBIT Margin = (Revenue Operating Expenses) / Revenue Net debt change Net debt is calculated by adding short-term and long-term debt and subtracting all cash and cash equivalents Net Debt change = Net Debt end Net Debt begin Share change Share change = (Total Shares end Total Shares begin ) / Total Shares begin Valuation Multiple EV/EBIT Enterprise Value (EV) is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents EV / EBIT = ((Total Shares * Share price) + Net Debt) / EBIT 22