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January 22, 2010

Virgin Media: Back Long An Old Friend

I purchased a new position in Virgin Media (VMED) in all Northlake client accounts, including my personal accounts. Clients who have been at Northlake for awhile may remember owning Virgin Media previously, even as far back as when it was known as NTL.

VMED is the largest cable company in the United Kingdom, with its network passing about half of all households. Historically, the company has faced some challenges due to the dominance of Rupert Murdoch’s Sky satellite broadcasting (very akin to DirecTV in the US). VMED’s various strategic responses have included acquisitions and network upgrades which left the company saddled with too much debt. Today, under new management, the company is leveraging its ownership of the fastest, most reliable broadband network in the UK. VMED is once again enjoying modest growth in subscribers and revenue while expanding margins, divesting non-core assets, and most importantly, rapidly paying down debt.

The combination of operational momentum and improving financial strength should allow VMED shares to reach the low $20s if current estimates for 2010 prove accurate.

Disclosure: Virgin Media is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal account. VMED is a long position in the Entermedia Funds where Steve Birenberg is co-owner, co-manager, and has a personal investment in the Funds.

Posted by Steve Birenberg at January 22, 2010 11:28 AM in VMED