SlowAppreciation Posted October 27, 2016 Share Posted October 27, 2016 Anyone here researched them? Coho Capital wrote them up about a year ago and the stock has gotten beaten down of late. A superficial look makes it appear cheap. Here's the letter for those interested: http://www.valuewalk.com/2016/02/coho-capital-2015-annual-letter/?all=1 VIC Writeup: https://www.valueinvestorsclub.com/idea/SINCLAIR_BROADCAST_GP__-CL_A/137108 Link to comment Share on other sites More sharing options...
dwy000 Posted October 27, 2016 Share Posted October 27, 2016 Core position for me. They will average over $4.25/share in FCF over each of the next two years with long term contracts in place and a management team that are good capital allocators. Solid dividend, buying back stock, smart acquirer. In addition, there is the big potential bonus of the wireless spectrum auction that could provide cash value to the company equal to a good chunk of the market cap. I don't get why it's being beaten down over the past month - except that the auction results are looking like they will be less that originally anticipated. But I think anything there is just gravy to the cash flow. Link to comment Share on other sites More sharing options...
Packer16 Posted October 27, 2016 Share Posted October 27, 2016 The whole group is getting beaten up. I own GTN and have looked at NXST. SBGI is also cheap and management has been acting good as of late. Before 2008, SBGI management got off the beaten path of TV stations and bought all kinds of unrelated businesses. SBGI has the largest potential FCC auction upside but how real the number is tough for me to handicap. GTN has focus and operates high performing stations in secondary markets. NXST should get some nice synergies with the LIN acquisition. In a related space I also like TSQ as they have aggregated county music and talk radio and music festivals with local connections. Packer Link to comment Share on other sites More sharing options...
merkhet Posted October 27, 2016 Share Posted October 27, 2016 The whole group is getting beaten up. I own GTN and have looked at NXST. SBGI is also cheap and management has been acting good as of late. Before 2008, SBGI management got off the beaten path of TV stations and bought all kinds of unrelated businesses. SBGI has the largest potential FCC auction upside but how real the number is tough for me to handicap. GTN has focus and operates high performing stations in secondary markets. NXST should get some nice synergies with the LIN acquisition. In a related space I also like TSQ as they have aggregated county music and talk radio and music festivals with local connections. Packer Why GTN over NXST? Link to comment Share on other sites More sharing options...
Packer16 Posted October 27, 2016 Share Posted October 27, 2016 At today's prices it is a toss-up or I would have split between the two but when I purchased GTN was cheaper than NXST. Packers Link to comment Share on other sites More sharing options...
merkhet Posted October 27, 2016 Share Posted October 27, 2016 At today's prices it is a toss-up or I would have split between the two but when I purchased GTN was cheaper than NXST. Packers Gotcha. Makes sense. Link to comment Share on other sites More sharing options...
KJP Posted October 27, 2016 Share Posted October 27, 2016 At today's prices it is a toss-up or I would have split between the two but when I purchased GTN was cheaper than NXST. Packers My understanding of the bull case for GTN is that it has (i) the best assets (#1 or #2 stations in smaller DMAs); and (ii) the best runway for future (accretive) growth through acquisitions because it is not close to ownership limits. Is that the thesis in a nutshell? The FCF yields on all of the broadcasters are very high, both in absolute terms and compared to their bond yields. Is that being driven by uncertainty over what local TV broadcasting will look like in 7-10 years, i.e., bondholders are confident that they will be paid off over that relatively short timeframe, but given the existing debt, equityholders must look over a much longer time horizon, and that longer timeframe is much cloudier? Link to comment Share on other sites More sharing options...
Packer16 Posted October 27, 2016 Share Posted October 27, 2016 That is it. What is driving the names down today is the reduction in TV ad spending due to Trump. If Trump's spending is an anomaly then the franchise is fine. If it is a trend then FCF in the future will be down. Packer Link to comment Share on other sites More sharing options...
SlowAppreciation Posted October 28, 2016 Author Share Posted October 28, 2016 Could anyone recommend a good resource (book? whitepaper?) on the cable/broadcast industry? Just want to better understand the dynamics at play between companies like Charter, SBGI, Disney, DirectTV, etc. Link to comment Share on other sites More sharing options...
glorysk87 Posted October 28, 2016 Share Posted October 28, 2016 Could anyone recommend a good resource (book? whitepaper?) on the cable/broadcast industry? Just want to better understand the dynamics at play between companies like Charter, SBGI, Disney, DirectTV, etc. Cable Cowboys is a book that anyone who wants to know the space should read...plus it's pretty entertaining. Otherwise I'm not sure there's a single primer. The industry is too big and evolving too quickly. I would just read a ton of sell side reports on all the big players in the industry. Link to comment Share on other sites More sharing options...
dwy000 Posted October 28, 2016 Share Posted October 28, 2016 Also youtube John Malone videos as well as David Zazlov (CEO of Discovery). Link to comment Share on other sites More sharing options...
dwy000 Posted November 2, 2016 Share Posted November 2, 2016 So they bought back 6.5% of their outstanding float, are paying a dividend that yields over 2.5% and making scheduled debt amortization....and all of that equates to only HALF of discretionary 2016 free cash flow. That's why I love this stock. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted December 20, 2016 Author Share Posted December 20, 2016 Spent the past couple weeks doing some research on the industry and SGBI in particular. Seems very attractively price (11% FCF yield, 7x-8x EV/EBITDA, 15% operating earnings yield, plus any upside from spectrum sale. My model even has a pretty low perpetual growth rate (2%), and declines in sales in 3 of the next 5 years (non election years). Anything I'm missing here, or is it really just people being super bearish on the long-term health of the broadcast industry (coupled with hefty debt)? Link to comment Share on other sites More sharing options...
maybe4less Posted December 20, 2016 Share Posted December 20, 2016 Anything I'm missing here, or is it really just people being super bearish on the long-term health of the broadcast industry (coupled with hefty debt)? You hit the nail on the head here. The broadcasting business is a great one, IF it stays around. The industry execs tend to think it will, but, of course, they are biased. I still own a little bit of Nexstar (a remnant position from when broadcasters had been left for dead) as the sector is objectively cheap and shows no imminent signs of collapse. But the fear that the business may start to go south at some point is real. It will most likely be a slow decline, but too many industries have fallen off a cliff after being disrupted by technology. It also doesn't help the broadcast viewers skew much older. That being said, there is some hope that Trump's FCC will reform the media ownership rules, which may set the stage for another profitable acquisition spree by these companies. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted December 20, 2016 Author Share Posted December 20, 2016 Anything I'm missing here, or is it really just people being super bearish on the long-term health of the broadcast industry (coupled with hefty debt)? You hit the nail on the head hear. The broadcasting business is a great one, IF it stays around. The industry execs tend to think it will, but, of course, they are biased. I still own a little bit of Nexstar (a remnant position from when broadcasters had been left for dead) as the sector is objectively cheap and shows no imminent signs of collapse. But the fear that the business may start to go south at some point is real. It will most likely be a slow decline, but too many industries have fallen off a cliff after being disrupted by technology. It also doesn't help the broadcast viewers skew much older. That being said, there is some hope that Trump's FCC will reform the media ownership rules, which may set the stage for another profitable acquisition spree by these companies. From what I read though, they haven't noticed any drops due to cord cutting as most of their channels bring local news to those communities. I think that no matter what the technology of the industry looks like in 10 years (OTT, delivered via internet, etc), local news is still going to be at least somewhat valuable, and SBGI has more stations than any other broadcaster. SBGI's stations still seem valuable no matter if it's being supplied via cables, satellite, antennae, or pipes? Link to comment Share on other sites More sharing options...
maybe4less Posted December 20, 2016 Share Posted December 20, 2016 Anything I'm missing here, or is it really just people being super bearish on the long-term health of the broadcast industry (coupled with hefty debt)? You hit the nail on the head here. The broadcasting business is a great one, IF it stays around. The industry execs tend to think it will, but, of course, they are biased. I still own a little bit of Nexstar (a remnant position from when broadcasters had been left for dead) as the sector is objectively cheap and shows no imminent signs of collapse. But the fear that the business may start to go south at some point is real. It will most likely be a slow decline, but too many industries have fallen off a cliff after being disrupted by technology. It also doesn't help the broadcast viewers skew much older. That being said, there is some hope that Trump's FCC will reform the media ownership rules, which may set the stage for another profitable acquisition spree by these companies. From what I read though, they haven't noticed any drops due to cord cutting as most of their channels bring local news to those communities. I think that no matter what the technology of the industry looks like in 10 years (OTT, delivered via internet, etc), local news is still going to be at least somewhat valuable, and SBGI has more stations than any other broadcaster. SBGI's stations still seem valuable no matter if it's being supplied via cables, satellite, antennae, or pipes? I agree, nothing really has hurt them yet. Maybe in 10 years you're right, but in 20? I don't know. We're unlikely therefore to see much multiple expansion on these stocks, IMO. You can make money the old-fashioned way through dividends/buybacks, but the tail risk will still be there. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted December 20, 2016 Author Share Posted December 20, 2016 Anything I'm missing here, or is it really just people being super bearish on the long-term health of the broadcast industry (coupled with hefty debt)? You hit the nail on the head hear. The broadcasting business is a great one, IF it stays around. The industry execs tend to think it will, but, of course, they are biased. I still own a little bit of Nexstar (a remnant position from when broadcasters had been left for dead) as the sector is objectively cheap and shows no imminent signs of collapse. But the fear that the business may start to go south at some point is real. It will most likely be a slow decline, but too many industries have fallen off a cliff after being disrupted by technology. It also doesn't help the broadcast viewers skew much older. That being said, there is some hope that Trump's FCC will reform the media ownership rules, which may set the stage for another profitable acquisition spree by these companies. From what I read though, they haven't noticed any drops due to cord cutting as most of their channels bring local news to those communities. I think that no matter what the technology of the industry looks like in 10 years (OTT, delivered via internet, etc), local news is still going to be at least somewhat valuable, and SBGI has more stations than any other broadcaster. SBGI's stations still seem valuable no matter if it's being supplied via cables, satellite, antennae, or pipes? I agree, nothing really has hurt them yet. Maybe in 10 years you're right, but in 20? I don't know. We're unlikely therefore to see much multiple expansion on these stocks, IMO. You can make money the old-fashioned way through dividends/buybacks, but the tail risk will still be there. Not the worst thing in the world. What's the latest on the spectrum? I haven't seen anything for a couple months. Link to comment Share on other sites More sharing options...
maybe4less Posted December 20, 2016 Share Posted December 20, 2016 Anything I'm missing here, or is it really just people being super bearish on the long-term health of the broadcast industry (coupled with hefty debt)? You hit the nail on the head here. The broadcasting business is a great one, IF it stays around. The industry execs tend to think it will, but, of course, they are biased. I still own a little bit of Nexstar (a remnant position from when broadcasters had been left for dead) as the sector is objectively cheap and shows no imminent signs of collapse. But the fear that the business may start to go south at some point is real. It will most likely be a slow decline, but too many industries have fallen off a cliff after being disrupted by technology. It also doesn't help the broadcast viewers skew much older. That being said, there is some hope that Trump's FCC will reform the media ownership rules, which may set the stage for another profitable acquisition spree by these companies. From what I read though, they haven't noticed any drops due to cord cutting as most of their channels bring local news to those communities. I think that no matter what the technology of the industry looks like in 10 years (OTT, delivered via internet, etc), local news is still going to be at least somewhat valuable, and SBGI has more stations than any other broadcaster. SBGI's stations still seem valuable no matter if it's being supplied via cables, satellite, antennae, or pipes? I agree, nothing really has hurt them yet. Maybe in 10 years you're right, but in 20? I don't know. We're unlikely therefore to see much multiple expansion on these stocks, IMO. You can make money the old-fashioned way through dividends/buybacks, but the tail risk will still be there. Not the worst thing in the world. What's the latest on the spectrum? I haven't seen anything for a couple months. Last I heard the broadcasters' prices were higher than the bidders were willing to pay. I honestly have no clue where it goes from here. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted February 9, 2017 Author Share Posted February 9, 2017 $313m for the spectrum:http://www.broadcastingcable.com/news/local-tv/sinclair-walk-away-spectrum-auction-313m/163224 I love this analyst quote Wells Fargo analyst Marci Ryvicker said in a newsletter the amount “was below our estimated 'in the middle' payout of $621MM, which does not come as a surprise." Link to comment Share on other sites More sharing options...
SlowAppreciation Posted February 22, 2017 Author Share Posted February 22, 2017 Glad I bought this at $30 last month Link to comment Share on other sites More sharing options...
dwy000 Posted February 22, 2017 Share Posted February 22, 2017 And still way undervalued given cash flows. They have continued to suggest that once the quiet period around the spectrum sale is over they will be active in consolidating the industry. Given Starboard just bought into Tribune Media (and their CEO is stepping down shortly) I would not be surprised to see Sinclair look to acquire them soon. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted March 10, 2017 Author Share Posted March 10, 2017 Hmmm... Sinclair Broadcast Group, Inc. ("Sinclair" or the "Company") (Nasdaq: SBGI) announced that it has priced an underwritten public offering of 12.0 million primary shares of Class A common stock at a price to the public of $42.00 per share. The Company also granted the underwriters a 30-day option to purchase up to an additional 1.8 million primary shares of Class A common stock on the same terms and conditions. The offering is expected to close on March 15, 2017, subject to customary closing conditions. The net proceeds are intended to fund future potential acquisitions and for general corporate purposes. http://www.prnewswire.com/news-releases/sinclair-broadcast-group-prices-public-offering-of-class-a-common-stock-300421632.html Link to comment Share on other sites More sharing options...
maybe4less Posted March 10, 2017 Share Posted March 10, 2017 Hmmm... Sinclair Broadcast Group, Inc. ("Sinclair" or the "Company") (Nasdaq: SBGI) announced that it has priced an underwritten public offering of 12.0 million primary shares of Class A common stock at a price to the public of $42.00 per share. The Company also granted the underwriters a 30-day option to purchase up to an additional 1.8 million primary shares of Class A common stock on the same terms and conditions. The offering is expected to close on March 15, 2017, subject to customary closing conditions. The net proceeds are intended to fund future potential acquisitions and for general corporate purposes. http://www.prnewswire.com/news-releases/sinclair-broadcast-group-prices-public-offering-of-class-a-common-stock-300421632.html This is strange. They are at the cap on broadcast stations, so what acquisition are they going to use it for? Maybe some digital asset that they can't lever? If they blow $500M+ on something like that, I'm guessing it won't be a good purchase. I guess more likely, they will spend it on more content, like their Tennis Channel purchase. Not sure buying niche channels is the best use of funds. Link to comment Share on other sites More sharing options...
Munger_Disciple Posted March 10, 2017 Share Posted March 10, 2017 They are at the cap on broadcast stations It is widely believed that the new FCC will reinstate UHF station discount now that the incentive spectrum auction is completed. If that happens, Sinclair's reach will drop to 24% from the current 38%. This will enable them to pursue additional acquisitions in the broadcast space. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted March 10, 2017 Author Share Posted March 10, 2017 They are at the cap on broadcast stations It is widely believed that the new FCC will reinstate UHF station discount now that the incentive spectrum auction is completed. If that happens, Sinclair's reach will drop to 24% from the current 38%. This will enable them to pursue additional acquisitions in the broadcast space. I was happy when they said they were going to be bringing the debt levels down, but to issue stock at $42/share when it still seems a undervalued to me doesn't instill a lot of confidence. Link to comment Share on other sites More sharing options...
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