Any thoughts? Looks like another Facebook, this thing is going to go down fast.
^ Pretty much exactly like facebook.
its not like facebook… i dont have any valuation details,
i guarantee that Manchester United will exist in 100 yeats… Facebook might not be around for another 10
Not unless it suffers poor operating results due to its high debt load…perhaps needing to sell assets…
This is a common theme for these megaclubs, high debt levels. Barca and Chelsea also have high debt levels and Real Madrid used to be in financial trouble till the Florentino Perez years.
i got the sense it makes slim profit margins…i believe the players have way too much sway over pay and they end up bidding away the profits all too easily…just on the face of it, not very attractive…
Plus, Manchester United is terrible at developing its own players…
I thought that avoiding sports franchises as investments was right up there with not investing in companies run by executives with gold pinky rings. Is this no longer true? Maybe it’s different this time.
I don’t think there is any specific rule. They can be managed really well, like the Steelers and the Giants, and stay profitable or they can be a vanity project.
I think they have very attractive characteristics if run properly, tremendous economic moat.
MANU has 35% EBITDA margins, which are forecast to grow over next several years as they strike new deals for sponsorships, etc.
Yes, the team can have variable performance in a given year (such as this year when they lost early…), but the investment merit here lies in the value of the other deals they can make. The merchandise deal they struck with Nike was done in 1995 and runs thru 2015. The value of the contract is going to be reset ~4x higher in early 2013 when negotiations begin. Also, they strike deals with mobile phone cos, credit card cos, consumer food/bev cos…all of these deals come at >75% gross margin to MANU.
Re: player salaries going up, new payment netting rules coming in 2014 will impose an effective salary cap for acquiring players in pro soccer in europe
I agree the stock is expensive, but owning dominant sports franchises over time may not be as bad an investment as everyone thinks, especially as these deals roll in…in the meantime you have a loyal fan base and pricing power for tickets. Does not seem that bad to me.
Stock has no voting rights; I don’t think they’ll be paying a dividend. Why would you invest in such a thing? I think buying a sport franchise is like buying an Airline stock.
yes, glazer still controls the vote, and will likely control the vote forever. but lacking voting rights is not a reason not to own stock in a company (many european companies, google, news corp are examples of these controlled entities, whether voting or economic).
no dividend yet, but eventually, yes MANU will pay a dividend when they have deleveraged the balance sheet
Airlines do not earn a return above cost of capital, whereas many premier sports franchises do. And MANU is an example of one that will create value over time in my opinion given various non-core opportunities that will flow through the P&L at huge margins
“Given various non-core opportunities”? MANU grocery store, MANU shoes, MANU convertible, MANU Restaurants. That’s a bad idea, IMO.
About the dividend; MANU had pre-tax profits of about 30(MM Pounds), debt of 430(MM Pounds), and interest payments of 50(MM Pounds); according to the Guardian. I wouldn’t hold my breath about them delveraging their balance sheet any time soon.
ppl need to look at the fundamentals and the numbers behind this company as Zesty points out…there is certainly a lot of wishful thinking going on…
Stock is down ~10% from IPO price. No Surprise here…
"Manchester United‘s net loss for its fourth quarter widened significantly from the year-ago period, the soccer club said on Tuesday in its first earnings report as a publicly traded company.
The club’s loss grew to £14.9 million, or $25.2 million, from £400,000, or $649,000. Its revenue tumbled 25 percent, to £74.5 million.
For the 2012 fiscal year, the company said that it earned £23.3 million, or $37.9 million, as commercial revenue rose. But overall revenue dipped 3 percent, to £320.3 million."
http://dealbook.nytimes.com/2012/09/18/manchester-uniteds-4th-quarter-loss-widens/
Cramer had interesting insightson this a couple weeks back. Among the most interesting (to me, as a non-sports fan), is that MANU doesn’t have a fixed amount of games each year – it depends on wins and such. He said this made analyzing and forecasting hard for valuation, because essentially you have to forecast their performance in the sports before one can start with the numbers. He said this added another complicatd layer to forecasting.
I dont think this is a big factor - Man Utd to reach the quarter finals in each competition in which they play (League Cup, FA Cup and Champions League) as a base case (this will almost always happen - 99 seasons out of 100) and then revenues from semi finals where they play the games (finals are never at Old Trafford, semi finals will be at Old T for one CL game and one League Cup game) . Finals revenues are pretty standard.
How this impacts commercial opps, ability to attract top players etc is tricky but there will be a correlation - in fact i think the “complication” of performance actually provides some real upside if you know the sport/team.
Thoughts?
Thing is everybody on the plant knows the sport/team, no competitive advantage there.
He also said that there are no salary caps in MANU’s leaque. This means maintaining the players to keep those guarenteed championship games may cause the team to experience rising costs in the future.