M c I n t i r e I n v e s t m e n t I n s t i t u t e 1
McIntire Investment Institute At the University of Virginia
Prepared by Garrett Hynson| 7 April 2010
Madison Square Garden Inc. (NASDAQ: MSG)
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Business Overview • Stock Chart • Basic Numbers and Ratios • Thesis Points • Risks or Signs That Possibly Indicate We’re
Wrong • Trends to Monitor • Final Recommendation
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Agenda
M c I n t i r e I n v e s t m e n t I n s t i t u t e 3
Business Overview
• 3 segments: sports, media, entertainment • Owns the New York Knicks, Rangers, and
Liberty • Owns Madison Square Garden and Fuse
networks • Produces and presents productions including the
Radio City Christmas Spectacular • Manages concerts and events in large cities
across America
M c I n t i r e I n v e s t m e n t I n s t i t u t e 4
Stock Summary
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Price: $27.71 (as of closing today) • Market Cap: 2.1 billion • P/E: 25.0 • P/B: 1.8 • P/S: 1.8 • P/CF: 11.0 • Revenue Growth: 4.9% • Debt to Equity: 0.0
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Basic Numbers and Ratios
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Unique position in the market • Vertical Integration • High barriers to entry • Undervalued • Helped by a rebounding economy
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Thesis Points
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Manages sports teams • Entertainment
segment cornered • These feed off one
another • Owns distribution
channels for sports and entertainment segments
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Thesis Point: Unique position in the market
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Distribution channels owned by the company
• Avoids risk – Buyers/suppliers going
out of business – More revenue streams
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Thesis Point: Vertical Integration
M c I n t i r e I n v e s t m e n t I n s t i t u t e
Revenue by Segment
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Revenue Percentage
Sports
Media
Events
Thesis Point: Vertical Integration
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Only so many sports teams • Takes lots of time and money to build an arena,
often publicly funded • Prestige of Madison Square Garden is
unmatchable • Difficult to build/match the distribution
channels – Exclusive rights to NYC sports programming – Fuse Networks reach 55 million households
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Thesis Point: High Barriers to Entry
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Total assets on balance sheet: approximately $2 billion
• Knicks are the NBA’s estimated most valuable team: $655 million
• Rangers are NHL’s estimated 2nd most valuable team: $411 million
• Calculations show, based on similar land, that Madison Square Garden’s land and building should be worth well over $2 billion (PPE <500)
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Thesis Point: Undervalued
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Strong correlation to overall economic performance
• Discretionary spending key for sports and events such as concerts and other live performances – TV channels are a
hedge against this 12
Thesis Point: Helped by a rebounding economy
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• People move away from live television • Piracy of content
– Hedged by the fact that sports demand live viewing
• Sports teams decline – New York is one of the biggest markets in the world – Knicks have seen a huge improvement
• Work stoppage in the sports market (see NFL) • Economic decline • Dolan family owns 70% voting rights
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Risks/Signs to Indicate We’re Wrong
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Performance of sports teams – Knicks – Rangers – Making a deep run into the playoffs, etc.
• Potential buyouts – possible beginning next year • Cash is being accumulated – will be used for
renovations of Madison Square Garden…other uses?
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Trends to Monitor
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• Initiate a purchase at 3% • Monitor the stock according to the important
trends to follow • Consider scaling up the position
– If more favorable conditions appear – If stock appears undervalued
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Final Recommendation
M c I n t i r e I n v e s t m e n t I n s t i t u t e
• MSG Company Website • ESPN • Forbes • Motley Fool • Federal Reserve Bank of New York • Easytobook.com
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Sources Used
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