Madison Square Garden (MSG) is a Stock to Own on Sport Team Value and Hidden Value of The Garden - Needham & Company
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Price: $237.22 --0%
Rating Summary:
15 Buy, 3 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
15 Buy, 3 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Needham & Company reiterated its Buy rating and raised estimates and its price target on Madison Square Garden (NASDAQ: MSG) Wednesday from $66 to $70.
"We recommend investors Buy MSG at current prices," analyst Laura Martin said. "We believe MSG's financial statements structurally understate MSG's cash flow potential and its hidden asset value."
Martin sees value in the company's sports teams. "MSG is the best way for public investors to participate in rising sports rights fees and the rising value of sports teams, in our view," she said. "Because MSG owns both the Knicks (pro basketball) and the Rangers (pro hockey) as well as the RSN on which they air, shareholders do not get visible “marked-to-market” cash flow streams for sports rights, even though sports rights fees are rising rapidly. For example, in LA, Time Warner Cable (TWC, Buy) paid a license fee to air Lakers basketball of $3B for a 20-year TV license term, and it paid the Dodgers $7B to air their games for a 25-year TV license term. Time Warner Cable will own no sports teams at the end of these license periods. Given MSG’s total enterprise value of $4.6B, this implies that investors are paying less for MSG than the present value of its TV license fees alone, and getting everything else for "free"."
The analyst also sees ample value in Madison Square Garden and said the Octomber 2013 completion of the "transformation project" suggests rising value in 2 ways: A) Investors benefit from rapidly rising marginal ROICs (as the CapX cycle ends); and B) Calendar 2014 will be the first time in 4 years when The Garden will have a "normalized" income statement.
Also, given that MSG owns the Garden, which occupies 2 city blocks in the middle of Manhattan (7th to 8th avenues, between 31st and 33rd streets), a REIT or sale/leaseback of that structure would unlock hidden value associated with this unique asset. To this point, the analyst notes press reports in 2Q12 stating that two developers leased the air rights over Manhattan's Hudson Yards from the Metropolitan Transportation Authority for 99 years, for $1 billion. "Given The Garden's location, we believe that its land and air rights have significant hidden asset value," Martin said.
The firm maintained its FY 2013 EPS estimate of $1.60 and raised FY 2014 EPS estimate from $1.76 to $1.95.
For an analyst ratings summary and ratings history on Madison Square Garden click here. For more ratings news on Madison Square Garden click here.
Shares of Madison Square Garden closed at $60.68 yesterday.
"We recommend investors Buy MSG at current prices," analyst Laura Martin said. "We believe MSG's financial statements structurally understate MSG's cash flow potential and its hidden asset value."
Martin sees value in the company's sports teams. "MSG is the best way for public investors to participate in rising sports rights fees and the rising value of sports teams, in our view," she said. "Because MSG owns both the Knicks (pro basketball) and the Rangers (pro hockey) as well as the RSN on which they air, shareholders do not get visible “marked-to-market” cash flow streams for sports rights, even though sports rights fees are rising rapidly. For example, in LA, Time Warner Cable (TWC, Buy) paid a license fee to air Lakers basketball of $3B for a 20-year TV license term, and it paid the Dodgers $7B to air their games for a 25-year TV license term. Time Warner Cable will own no sports teams at the end of these license periods. Given MSG’s total enterprise value of $4.6B, this implies that investors are paying less for MSG than the present value of its TV license fees alone, and getting everything else for "free"."
The analyst also sees ample value in Madison Square Garden and said the Octomber 2013 completion of the "transformation project" suggests rising value in 2 ways: A) Investors benefit from rapidly rising marginal ROICs (as the CapX cycle ends); and B) Calendar 2014 will be the first time in 4 years when The Garden will have a "normalized" income statement.
Also, given that MSG owns the Garden, which occupies 2 city blocks in the middle of Manhattan (7th to 8th avenues, between 31st and 33rd streets), a REIT or sale/leaseback of that structure would unlock hidden value associated with this unique asset. To this point, the analyst notes press reports in 2Q12 stating that two developers leased the air rights over Manhattan's Hudson Yards from the Metropolitan Transportation Authority for 99 years, for $1 billion. "Given The Garden's location, we believe that its land and air rights have significant hidden asset value," Martin said.
The firm maintained its FY 2013 EPS estimate of $1.60 and raised FY 2014 EPS estimate from $1.76 to $1.95.
For an analyst ratings summary and ratings history on Madison Square Garden click here. For more ratings news on Madison Square Garden click here.
Shares of Madison Square Garden closed at $60.68 yesterday.
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