Corsair-Q3-NWSA-Thesis

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					Appendix – News Corp (“NWSA” – $16.00)

We believe NWSA represents a classic undervalued spinoff investment, created by a large cap company
spinning off its smaller, less exciting businesses. The spinoff of NWSA caused - what we often refer to as - a
“prisoner exchange” of shareholders. Old News Corp shareholders interested in a pure play growth investment
held onto their FOXA (21st Century Fox) stock, but dumped the NWSA spinoff, presenting an opportunity for a
new base of investors to take advantage of the selling pressure in NWSA. The misperception of NWSA as a
shrinking newsprint business enabled new investors to purchase several growing video/digital assets (which
contribute approximately 50% of the company’s EBITDA) at a cheap valuation. With solid cash generative
businesses, a net-cash rich balance sheet of almost $4.00 per share and a management team focused on creating
shareholder value, NWSA shares offer limited downside and upside of a $25.00 stock price in the next 12
months. Potential catalysts include accretive acquisitions, share buybacks, a growing dividend policy, more
bullish sell-side coverage and a re-rating of the stock.

Business Summary

“The companies that make up the new News Corp. are some of the most extraordinary and brilliant brands in
the world… they're undervalued and I believe underdeveloped, but all that changes starting today.” – Chairman
Rupert Murdoch

NWSA is a collection of global media assets with renowned brands in publishing, information services, cable
sports, cable service and digital real estate classifieds.

Publishing

On the publishing side of the business, NWSA has a News and Information Services segment (Dow Jones, The
Wall Street Journal, Barron’s, The New York Post, The Sun, The Times, The Daily Telegraph) and a Book
Publishing segment (HarperCollins).

It is well-known that physical newspaper circulation and associated advertising revenues have been under
pressure as other methods of receiving information have become increasingly available and popular. In response
to these industry challenges, NWSA has employed a strategy to monetize its valuable content by 1) using a hard
paywall for online access to articles and 2) executing a severe cost-cutting program at less-valuable
publications.

At HarperCollins, management has steadily increased margins and EBITDA in recent years, taking advantage
of the transformation by many consumers to e-books. Despite slight revenue declines in 2011 and 2012, the
book publisher appears to have reached an inflection point, reporting 15% revenue growth in 2013 (year end
6/30/13). NWSA management has embraced the digital revolution, consistently exploring ways to maximize the
benefits digitization offers across its publishing asset base. Therefore, we expect NWSA to, over time, begin to
grow its top line and expand its margins in all of its publishing units.


This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its
affiliates have examined or may examine opportunities. Additionally such examples do not represent Corsair Capital’s entire portfolio and in the aggregate may represent only
a small percentage of Corsair Capital’s portfolio holdings. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change
its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued either now or in the future
will be profitable. Such activities may in fact result in losses.



          
Non-Publishing

Despite being viewed as a publishing company, NWSA actually owns several non-publishing, valuable assets in
Australia that will contribute ~45% of 2014 EBITDA. As a result of past acquisitions, NWSA holds 100% of
Fox Sports Australia (#1 cable sports network), 50% of Foxtel (monopoly cable provider), and 62% of REA
Group (“REA AU”; digital real estate classifieds).

Fox Sports Australia and Foxtel are high quality, growing businesses. Owned together, these two assets provide
NWSA with significant competitive advantages when it comes to pay TV in Australia. By controlling the
monopoly cable provider in Foxtel, NWSA has locked in distribution for Fox Sports. Fox Sports – whose
channels are among the most popular in the Australian TV market – is essentially offered exclusively to Foxtel
subscribers. Having both businesses under one roof has created a virtuous circle for NWSA and there is
significant opportunity in Australia to increase penetration. Only 30% of the market subscribes to pay TV, as
compared to 85% in the U.S. Furthermore, Foxtel has focused on driving annual revenue per user (“ARPU”)
growth for the last several years by 1) expanding its high-margin value added services (HD, multi-room, etc)
and 2) raising prices. We expect continued growth and margin expansion for both of these high-quality
businesses.

REA is an online, real estate classifieds and advertising company, operating primarily in Australia. The
customers for this business are real estate agents who pay an annual subscription fee to post their listings.
Interestingly, REA has been able to double its ARPU and almost quadruple its EBITDA over the last 5 years by
selling agents incremental services such as enhanced listings, featured properties, and search placement
preferences. These premiere options represent value-add to the agent, and these incremental revenue streams
have 100% EBITDA margins. REA is a unique asset that provides high-margin growth and gives the overall
corporation more of a footprint in the global digital transformation.

NWSA also owns an education company called Amplify that it purchased for $360MM. This business currently
loses money and we exclude its results from our estimates. Amplify creates digital products and services for the
K-12 education sector. NWSA believes this company will eventually revolutionize the relationship between
students, teachers, and their curriculums.

Valuation

“My goal for the new News Corp. is to compress the success time line of the original News Corp. from 60 years
to 10 years.” – Chairman Rupert Murdoch

We have valued the company on a Sum-of-the-Parts basis. At $16.00 per share, NWSA is trading for only 4.7x
2014 adjusted EBITDA, being valued in the market as a low quality publishing business, despite the non-
publishing assets contributing almost half of 2014 EBITDA. By comparison, New York Times (“NYT”) trades
for 6.5x 2014 EBITDA and we believe this is a good comparable for NWSA’s U.S. publishing unit. Therefore,
we value the News and Information segment at 4x-6x 2014 EBITDA, which takes into account the lower
quality Australian and U.K. publishing assets. We apply a 5x-7x EBITDA multiple range for the Book

This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its
affiliates have examined or may examine opportunities. Additionally such examples do not represent Corsair Capital’s entire portfolio and in the aggregate may represent only
a small percentage of Corsair Capital’s portfolio holdings. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change
its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued either now or in the future
will be profitable. Such activities may in fact result in losses.



          
Publishing business (HarperCollins). Comparable company Scholastic Corp (“SCHL”) is currently trading for
5.7x fiscal 2014 EBITDA. While HarperCollins and SCHL have similar revenue and EBITDA margin profiles,
HarperCollins is experiencing faster growth and warrants a premium multiple.

Based on publicly-traded cable stations which trade for 10x 2014 EBITDA, we value the Cable Network
Programming segment (ie, Fox Sports Australia) at a conservative range of 8x-10x 2014 EBITDA. For Foxtel,
6x-8x seems appropriate compared to other cable providers. REA, currently trading at 19x 2014 EBITDA, gets
a full market multiple due to its impressive annual revenue growth (~20%) and rich EBITDA margins (~50%).
However, we use a conservative 12x-18x range, given the potential for weakness in the Australian economy.

Conclusion

“We are focused on increasing free cash flow and using that cash flow long term to strike a balance between
further expansion and the return of capital.” – CEO Robert Thomson

Based on conservative valuation multiples, we believe NWSA is a very attractive, newly created spinoff
investment perceived by the stock market as a boring publishing company. Our view is that management is
focused on creating value by optimizing cash generation and prioritizing smart capital allocation. The company
has a $500MM buyback authorization in place and expects to announce a regular dividend in the future as well.
However, a more significant driver of the stock could end up being accretive and strategic acquisitions.
Management has been clear about its goal of adding more content to its portfolio – likely a digital or video asset
that could be disseminated throughout its network of publishing and cable assets. We believe market sentiment
around this company is mostly negative, and that any good use of cash could drive the stock potentially as high
as $30.00 per share, depending on what the company acquires.




This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its
affiliates have examined or may examine opportunities. Additionally such examples do not represent Corsair Capital’s entire portfolio and in the aggregate may represent only
a small percentage of Corsair Capital’s portfolio holdings. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change
its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued either now or in the future
will be profitable. Such activities may in fact result in losses.



          
 NWSA                                              10/14/2013
 Summary
 Fiscal Year End is June 30

 Capital Structure
 Stock Price                                         $16.00
 Diluted S/O                                           579
 Mkt Cap                                              9,264
                                                                    per Share
 Cash and Equivalents                                (2,628)         ($4.54)
 Foxtel Non-Recourse Debt (50% interest)              1,206          $2.08
 Foxtel Note Receivable                               (413)          ($0.71)
 NOL NPV                                              (275)          ($0.47)
 Net Debt                                            (2,109)         ($3.64)

 Ent Val                                             $7,155

 Current Valuation                                 FY 2014E        EV Multiple
 EBITDA                                             1,536             4.7x
 EBITDA - CapEx                                     1,136             6.3x



                                                   FY 2014E                      EBITDA Multiple                             Enterprise Value
 Sum of the Parts                                   EBITDA          Downside          Base            Upside      Downside        Base          Upside

 News and Information Services                        $775            4.0x             5.0x             6.0x      $3,102         $3,877         $4,652
 Book Publishing                                      166             5.0x             6.0x             7.0x        828           994            1,160
 Cable Network Programming                            160             8.0x             9.0x            10.0x      1,281          1,441           1,601
 Foxtel (50% Interest)                                489              6.0x            7.0x             8.0x      2,936          3,425           3,914
 REA AU Equity (62% interest)                         119             12.0x           15.0x            18.0x      1,426          1,783           2,140
 Corporate                                            (173)            5.8x            6.8x             7.8x       (994)         (1,167)         (1,340)
   Total                                             $1,536            5.6x            6.7x             7.9x      $8,578        $10,353         $12,127

 Amplify/Other (1)                                                                                                   0            180             360
 Net Cash/Equivs                                                                                                   2,109         2,109           2,109

   Equity Value                                                                                                   $10,688       $12,642         $14,596
   Value per Share                                                                                                 $18.46        $21.83         $25.21
   Return on Current Stock Price                                                                                   15.4%         36.5%           57.6%

 Notes
 1) We value Amplify in our Downside, Base, and Upside cases at 0%, 50%, and 100% of its equity purchase price.




This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its
affiliates have examined or may examine opportunities. Additionally such examples do not represent Corsair Capital’s entire portfolio and in the aggregate may represent only
a small percentage of Corsair Capital’s portfolio holdings. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change
its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued either now or in the future
will be profitable. Such activities may in fact result in losses.



           
IMPORTANT DISCLOSURES

An investment in any Corsair fund is speculative and involves a high degree of risk. Past performance is not
necessarily indicative of future results. There can be no assurances that any Corsair fund will continue to have a
similar return on invested capital because, among other reasons, there may be differences in economic and
market conditions, regulatory and political climate, portfolio size, investment opportunities, expenses and
structure.

References to benchmarks are for illustrative purposes only. Comparisons to benchmarks have limitations
because characteristics of such benchmarks, such as level of volatility and position concentration, among other
things, may differ from those of the applicable Corsair fund. The Corsair funds do not attempt to track a
benchmark.

The information in this letter is as of the date set forth on the cover page hereto and is subject to change without
notice. The delivery of this letter at any time does not imply that the information or opinions contained herein
are correct at any time subsequent to the date set forth on the cover page hereto.

Any forward-looking statements included in this letter represent the subjective views of the portfolio managers
of Corsair, including the future performance of the market generally and portfolio companies specifically, based
on assumptions that may or may not prove to be correct. There can be no assurance that these views are
accurate or will be realized, and nothing contained here is, or should be relied on as, a promise as to the future
performance or condition of any Corsair fund, any portfolio company or the market generally. Industry experts
and the portfolio companies themselves may disagree with these views and/or assumptions.

Certain information contained herein has been obtained by Corsair from third parties. While Corsair believes
that such sources are reliable, it cannot guarantee the accuracy of any such information and does not represent
that such information is accurate or complete.




This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its
affiliates have examined or may examine opportunities. Additionally such examples do not represent Corsair Capital’s entire portfolio and in the aggregate may represent only
a small percentage of Corsair Capital’s portfolio holdings. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change
its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued either now or in the future
will be profitable. Such activities may in fact result in losses.



          

				
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