Apr
30

LA Clippers Sale Could Provide Catalyst for Madison Square Garden (MSG) Stock

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LA Clippers Likely to Fetch Massive Premium to Forbes Valuation in Imminent Sale

Hats off to the NBA and new commissioner Adam Silver for acting swiftly and decisively today in dealing with recently surfaced racist comments from Los Angeles Clippers Owner Donald Sterling.  The NBA displayed a zero tolerance for racism in the league by banning Sterling for life, fining him $2.5 million, and effectively forcing him to sell a team he has owned for more than 30 years.  Once the laughingstock of the NBA, the Clippers are now a top team featuring two of the most exciting players in the league in Blake Griffin and Chris Paul, and will be a highly desirable asset when they hit the market.

The Milwaukee Bucks grabbed headlines for the first time in ages this month when they were purchased by Wesley Edens and Marc Lasry for an NBA record $550 million.  Despite playing in one of the NBA’s worst stadiums, having the NBA’s worst team, playing in one of the NBA’s smallest markets, and being ranked as the NBA’s least valuable franchise; the Bucks managed to command a 36% premium over their most recently estimated value as per Forbes.  Marc Cuban wasted no time in declaring the purchase to be a bargain, stating that he believes the true value of an NBA franchise is in excess of $1 billion.

When Forbes released their annual list of team valuations in January, they pegged the Clippers at $575 million, good for 13th in the league.  If the Clippers were to command a similar 36% premium to this figure, they would be valued at $782 million.  Although being a lofty figure, I believe this mark will be easily eclipsed.  While the sale of the Milwaukee Bucks was met with almost zero fan fare and was done very much under the radar, the imminent sale of the Clippers will be highly publicized and is likely to create a bidding war, as numerous parties have already been named as potential suitors and more are sure to arise over the coming weeks.  Its not hard to see the Clippers fetching bids in the range of $800 million – $1 billion.  Such a number would force people to reconsider the value of all NBA franchises, which would be  nothing but beneficial to Madison Square Garden (MSG) shares.  A 36% increase to Forbes’ valuation of the New York Knicks would bring their value to $1.9 billion, a 50% increase would see them worth $2.1 billion.  Such a revision upwards should be seen as significant for Madison Square Garden as a whole, as they currently sport a market cap of only $4.2 billion, potentially providing a boost to their long-stagnant stock.  I believe shares of MSG are significantly undervalued based on a sum of the parts analysis and view Madison Square Garden stock as a strong buy.

Disclosure: I own shares of Madison Square Garden.

 

Mar
27

Madison Square Garden (MSG) Receives Bids For Fuse TV

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Multiple Bidders Emerge for Madison Square Garden’s (MSG) Fuse TV Network

Less than two weeks after receiving a $200 million bid for their Fuse TV Network from both Diddy and Jennifer Lopez, Madison Square Garden (MSG) has reportedly received a $350 million cash offer from Artist Series Inc.  Relatively unknown, Artist Series is in the process of securing financing for both the transaction and an additional $200 million for operating costs.  Management has yet to respond to any of the bids they have received thus far.  When we first recommended purchasing shares of MSG in October, we noted that J.P. Morgan was in the process of shopping Fuse TV around.  At the time we expected Fuse would fetch anywhere from $300 – $400 million in a sale, right in line with the offer from Artist Series.  With three parties expressing interest in such a short period of time, we could see an upward revision to the current bid.  Madison Square Garden’s stock has been extremely range bound since our recommendation.  A sale of Fuse TV coupled with the recent hiring of Phil Jackson as President of Basketball Operations could help awaken shares of MSG and get them moving towards fair value.  I continue to view Madison Square Garden as a strong buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Feb
25

Melco Crown Entertainment (MPEL) To Start Paying Quarterly Dividend

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Melco Crown Announces New Dividend Policy

After closing out an incredibly strong 2013, Melco Crown Entertainment (MPEL) announced their intention to pay out a special dividend to shareholders in the amount of $191 million. Today the company shared their plans regarding their dividend payouts moving forward, announcing that Melco Crown will begin paying out quarterly dividends of around 30% of consolidated net income attributable to the company. The company cited their increasingly strong financial position bolstered by significant growth in earnings and cash flows at City of Dreams Macau, as reason to institute their new dividend. The special dividend that will be paid in in the amount of $191 million, translates to approximately $0.34 per ADS.

City of Dreams Macau Continues to Dominate Premium Mass Market

As evidenced in their most recent quarterly report released two weeks ago, City of Dreams Macau continues to grow at a staggering pace. In Q4 2013, City of Dreams generated revenues of $1.1 billion, up from $772 million in the previous year. The jump in revenues led to Q4 2013 adjusted EBITDA of $347 million, a 58% jump year over year. These gains were driven by a 57% rise in mass table games revenue. City of Dreams non-gaming revenues during the quarter rose 10% year over year as room occupancy rates improved 2% to a staggering 98%, average daily room rates also increased by 2% to $193. During 2013, market wide revenues in Macau rose 19%. Melco Crown was able to grow at an even faster pace as the mass market segment that City of Dreams caters to continued to deliver above-market growth. This trend should be expected to continue for the foreseeable future as infrastructure improvements (Hong Kong – Zhuhai – Macau Bridge, and the Macau Light Rail System) enable more and more middle class Chinese to travel to Macau.

City of Dreams Manila, Studio City Macau Remain on Track

At their most recent conference call Melco Crown reiterated that both their City of Dreams Manila and Studio City Macau resorts are on budget and on track to open at their previously planned dates. During Q4 2013 MPEL announced the addition of the Nobu Hotel to their City of Dreams Manila complex, adding to the collection of luxury brands that this new world class resort is already comprised of. Scheduled to open late this year, the City of Dreams Manila project gives Melco Crown an early and dominant position in the new Philippines’ gambling market that is expected to eclipse Las Vegas in revenues by 2017.

CoD Manila

Melco Crown’s cinema themed mega-resort, Studio City Macau, remains on schedule to open in mid-2015. Studio City Macau will lie on the premier location on the Cotai strip (think Bellagio in Las Vegas), and will also cater to the premium mass market crowd that Melco Crown has had so much success with at City of Dreams. The company also remains on track with their plans for a fifth and final tower at City of Dreams Macau opening in late 2016 – early 2017.

MPEL is a Buy at Current Levels

Melco Crown Entertainment was our very first buy recommendation in September 2013 when shares traded at $31.60. Despite shares appreciating 35% since our initial highlight of the company, I continue to view MPEL as a strong buy and the top play in Macau (Las Vegas Sands is a close second).  Gaming revenues during 2013 for the entire Macau market easily continued their trend of outperforming analyst expectations, and 2014 appears to be off to a similar start with 20% year over year growth being reported thus far for the month of February. Management’s decision to implement a regular quarterly dividend with two massive projects still in the pipeline is a testament to the extremely strong financial position Melco Crown has achieved thus far and to their confidence in the future of the company as a whole.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Jan
08

Reviewing Our 2013 Picks: MPEL, MSG, TTWO, YHOO, FL

5th Street Research

5th Street Research’s Buy Recommendations Easily Outperform The Market

Having been away from the market with other obligations for the past month or so, I thought it would be interesting to review our 2013 picks before making any new recommendations in 2014. Since launching in late September, we have published buy recommendations on 5 different companies: Melco Crown Entertainment (MPEL), Madison Square Garden (MSG), Take Two Interactive (TTWO), Yahoo (YHOO), and Foot Locker (FL). While the S&P 500 and Nasdaq finished out the year strong, our picks have easily outperformed the broad markets, returning an average of 16.5% vs. 7.5% for the S&P 500. A brief update on each of our recommendations below…

Melco Crown Entertainment (MPEL): City of Dreams Manila and Studio City Macau

Buy Recommendation
Published 9/27/2013: The Best Bet in Macau is Melco Crown Entertainment (MPEL)
Price Then: $31.60
Price Now: $42.99
% Change: +36%

MPEL

Macau as a whole has been the recipient of quite a bit of attention around here since launching, and for good reason… Macau has been the world’s fastest growing economy over the past decade with average annual GDP growth near 15%. It generates more than 7x  the revenue of Las Vegas and is the gambling epicenter of the world. Melco Crown’s City of Dreams is one of the most impressive properties in Macau and dominates the ultra important “Premium-Mass” market in the region. MPEL’s revenues and profits stand to explode over the next two years as they open two new massive properties, Studio City Macau and City of Dreams Manila. Studio City boasts the best location on the Cotai Strip, Macau’s version of Las Vegas Blvd., and is poised to be one of the biggest beneficiaries of the continued growth of the Macau. Despite the 36% gain since our initial recommendation of their shares, I continue to view MPEL as a strong buy for the foreseeable future.

Madison Square Garden (MSG): Hidden Assets and Rising Sports Franchise Valuations

Buy Recommendation
Published 10/11/2013: Significant Value in Madison Square Garden (MSG)
Price Then: $57.54
Price Now: $56.72
% Change: -1.4%

MSG

Madison Square Garden has been the laggard of our model portfolio thus far, currently down 1% since our original recommendation. The New York Knicks have gotten their season off to a terrible start this year, however there has been little to no other news or events out of MSG in the past 3 months. With the Madison Square Garden renovation project finally complete, cash flows and earnings will start becoming normalized for the first time since their IPO. The real story here though remains the hidden value of the company’s array of assets. As the owner of the Knicks and Rangers, MSG Networks, Madison Square Garden Arena and its associated air rights, and numerous other venues/ assets; MSG remains greatly undervalued when using a sum of the parts analysis. This one may require some patience, but I continue to view MSG as a strong buy.

Take Two Interactive (TTWO): Massive Cash Hoard, Best IP Portfolio in the Industry

Buy Recommendation
Published 10/15/13: GTA V Makes Take Two Interactive (TTWO) a Steal
Price Then: $16.94
Price Now: $17.80
% Change: +5%

TTWO

Although shares of Take Two have appreciated since our recommendation, they have lagged the market, which is somewhat perplexing after Grand Theft Auto V shattered analyst estimates and became the highest grossing entertainment release ever. While analysts anticipated TTWO would sell 18 million units of GTA V during their most recent quarter (a number I reported would prove to be very low), 25 million copies were actually sold. TTWO stock failed to jump on this news though, they actually traded down sharply the next few sessions as management failed to give much clarity regarding their future pipeline/ next blockbuster release. TTWO’s haul from GTA V should leave the company with more than $1B worth of cash on their balance sheet. With a market cap of only $1.6B, this cash hoard is substantial. Take Two also owns arguably the most valuable intellectual property portfolio in the industry with proven franchises such as GTA, BioShock, Red Dead Revolver, Max Payne, and NBA 2k. Despite management remaining mum on the next big release for now, they have an amazing track record when it comes to making hits. Everything considered, I see fair value for Take Two stock between $22-$24, at least 25% upside from today’s closing price. I maintain a buy rating on shares of TTWO.

Yahoo (YHOO): Alibaba Stake Continues to Create Value, Meyer on Acquisition Spree

Buy Recommendation
Published 10/15/2013: Amended Alibaba Agreement Makes Yahoo (YHOO) More Attractive
Price Then: $33.38
Price Now: $41.03
% Change: +22.9%

YHOO

As Alibaba continues their rapid growth, Yahoo continues to reap the rewards. Despite a core business that is still struggling to gain momentum, Yahoo had a great 2013 with shares more than doubling during the year. New CEO Marissa Mayer has been on quite the shopping spree since taking the helm, with Yahoo acquiring 28 companies in 2013, including a $1B purchase of Tumblr. Mayer has made it clear that she intends to ensure Yahoo remains the world’s homepage while also placing a large emphasis on mobile and content creation. In a demonstration of their commitment to content, Yahoo recently hired Katie Couric as a ‘global anchor’ and released a new News Digest App. It is yet to be seen how any of this efforts will pan out, but if nothing else, Mayer has been ambitious. YHOO should still see some upside from Alibaba as it nears its inevitable IPO and could get a lift from the news when announced, but shares aren’t as much of a bargain as they were 3 months ago. If you already own YHOO stock I wouldn’t be in any rush to sell it, but I wouldn’t be in any rush to go out and buy more either. I view shares as undervalued still with 10-15% upside, but would need to see core operations start to show signs of improvement before considering YHOO a strong buy at current levels.

Foot Locker (FL): Buy into Nike, Adidas, and Under Armour’s Growth at a Discount

Buy Recommendation
Published 10/26/2013: Try Foot Locker (FL) on for Size
Price Then: $34.20
Price Now: $41.11
% Change: +20.2%

FL

Last but certainly not least of our recommendations during 2013 was Foot Locker. The athletic apparel industry has been one of the strongest performers of the past 25 years. Nike is one of the all time great growth stocks and shows no sign of slowing momentum. Adidas and Under Armour fit the same mold. Justifiably so, all three of these companies trade at lofty valuations. Foot Locker is the largest retailer of athletic shoes in the US, dominating the market with the portfolio of brands including FootAction, Eastbay, Champs, and of course their namesake stores. Management has proven to be shareholder friendly, approving a $600 million buyback and an 11% dividend hike last year. While many retailers reported lackluster earnings in their most recent quarter, Foot Locker easily exceeded both earnings and revenue estimates. Despite all of this, shares still trade at a significant discount to retailers such as Finish Line and Dick’s Sporting Goods. The athletic apparel industry has shown no signs of slowing, and Foot Locker is as well positioned to benefit from this trend as anyone. As long as they continue to trade at such cheap valuations relative to their peers, I will continue to maintain a buy rating on shares of FL.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Jan
03

Solar Stocks Experience A Boom in 2013

Solar Field

Solar Stocks Look To Carry Their Momentum into 2014

The stocks of several solar power companies have performed very well this year. Top performing stocks in this sector include the stocks of First Solar Inc., (FSLR) which is up 95.05% year-to-date. SunPower Corp. (SPWR) is up by a whopping 450.71%. JinkoSolar Holding Co. Ltd. (JKS) is up 397.75 for the same period while Canadian Solar Inc. (CSIQ) is up 790.59%.

NASDAQ’s StreetAuthority identified hurdles the industry was able to overcome last year. One was the boom in capacity which prompted prices to drop rapidly. The price drops led to the bankruptcy of weak players in the industry, which caused a slowdown in capacity growth that allowed demand to catch up. Unfortunately for the industry, gas prices have also fallen so the solar industry missed out on the opportunity to see greater demand.

Developments in First Solar, SunPower, and Canadian Solar

Last month, First Solar announced that it will invest $100 million in Japan. The company said they will partner with local companies to develop, construct, and operate solar power plants. Japan has made it its policy to turn to other sources of energy like solar power and wind power since the Fukushima disaster. Japan shut off most of its nuclear power plants after the disaster. Nuclear power supplied 30% of the nation’s electricity. First Solar announced net sales of $1.3 billion in the third quarter of 2013. Japan has been an attractive market for many solar companies due to its pro-renewable energy policy.

SunPower is also making its presence felt overseas. SunPower announced that the company is expected to provide engineering, procurement, and construction services for an 86 megawatt-peak (MWp) solar power project in South Africa. Total S.A. was selected as the preferred bidder for the project.

Raina Sharma of The Street rated SunPower’s stock as a “hold” due to the company’s poor overall profit margins. Sharma did note that SunPower showed strength in terms of revenue growth and earnings per share growth but its poor profit margins overshadowed those strengths.

Guelph-Ontario based Canadian Solar is one of the top performing solar stocks this year. The company recently announced that the National Bank of Canada is extending a C$35 million short-term loan to Canadian Solar. The loan will be used to finance Canadian Solar’s projects in Ontario.

Solar Industry Forecasts

PV-Magazine cited an investment note from Deutsche Bank that predicts that photovoltaic capacity in the U.S. will reach 50 GW by the end of 2016. Deutsche Bank is also predicting that the annual market will reach 12 GW in 2015 and 16 GW a year after. The investment note also said that solar has already achieved grid parity in Hawaii and California along with eight other states.

SPV Market Research’s Paula Mints was also cited in the same article as saying that the large PV projects that are being installed in the U.S. have been in development for years and that the same level of demand could not be counted on in the future. Mints also notes that the residential market for solar has been slowing down lately.

About the author: Gilbert Bermudez writes for CompareHero, Malaysia’s leading bank card comparison website. Loves fishing, swimming and a hobbyist. You can follow his activity on his Google+ and Twitter.

Disclosure: The author has no positions in any stocks mentioned, and has no plans to initiate any positions within the next 72 hours. The author also has no business relationship with any company whose stocks have been mentioned here.

Dec
02

Manny Pacquiao Fight and Grand Prix Drive November Revenue Growth in Macau

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November Gambling Revenue Growth in Macau Tops Estimates

On the heels of  a record setting October, gambling revenues in Macau rose 21.3% year-over-year during November to $3.78 billion, topping analyst expectations once again. During the month Macau hosted their annual two week long Grand Prix event and a Manny Pacquiao boxing match at Las Vegas Sands’ (LVS) Venetian Macao resort, attracting more VIPs than anticipated as the region continues to diversify their entertainment options and find new ways to attract wealthy gamblers. Melco Crown (MPEL) and Las Vegas Sands are best positioned to capitalize on this trend with their strong presence on the rapidly growing Cotai Strip, Macau’s version of Las Vegas Blvd. Given the revenue reports out of Macau the past two months, the major casino operators are well on their way to topping analyst estimates during the 4th quarter and continue outperforming the broad markets.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
26

Take Two (TTWO) Buys Back 12 Million Shares of Their Stock From Carl Icahn

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Carl Icahn Sells His Entire Take Two (TTWO) Stake Back to the Company

Take Two Interactive (TTWO) announced this morning that they would be repurchasing 12 million shares of their stock from the Icahn Group for $203.5 million. The move ends Icahn’s relationship with the company after an 81% return on his investment in TTWO. Three directors whom were placed on the board by the Icahn Group announced that they would be stepping down as per the buyback agreement. The 12 million shares bought back represent nearly 14% of the outstanding shares of Take Two stock as of yesterday’s close. Shares are down 4% currently today, however I view this news as being quite bullish and believe it shows that management also feels TTWO shares are being significantly undervalued at present levels. The repurchase was done outside of their existing buyback plan announced in February of this year that authorizes the company to repurchase an additional 7.5 million shares of stock. I currently view TTWO as a strong buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
25

Has Take Two’s (TTWO) Stock Found a Bottom?

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Take Two (TTWO) Looks to End Downtrend After Developing A Double Bottom

Despite blowing away analyst estimates during their most recent quarter, Take Two Interactive (TTWO) stock is down 5% since reporting, flat from where I recommended purchasing shares in anticipation of stronger than expected Grand Theft Auto V sales. I still view TTWO as a strong long-term buy, and believe their downside is very limited from their current levels given their massive cash position and extremely valuable intellectual property portfolio. Both Microsoft’s (MSFT) Xbox One and Sony’s (SNE) PlayStation 4 sold over 1 million units on their release day, positive signs for the industry as a whole heading into the holiday season.

Looking at their chart we can see that Take Two has traded down sharply on the open the past two sessions, but bounced strongly off of the $16.35 level and recouped their initial losses each day, forming a very defined double bottom pattern. Shares could run into some resistance at $17, but a move above that level would confirm their short-term reversal and set the stage for a move higher. Take Two shares are currently at a very attractive entry point and I believe $16.35 will prove to be the floor for TTWO’s stock price moving forward.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
25

iRobot (IRBT) Stock in Descending Triangle Pattern

IRBT

iRobot (IRBT) Stock Nears Test of Important Support Level, Chart Pattern is Bearish

Despite a strong run for equities the past few months, shares of iRobot (IRBT) are down more than 20% from their 52 week high of $41 set in July. Best known for their robotic cleaning devices such as the floor-vacuuming Roomba, iRobot disappointed investors with their 3rd Quarter results, reporting revenue and guidance that came in below analyst expectations. IRBT shares are currently in a bearish descending triangle pattern which began in July, and are near a key support level around $32.40. The pattern indicates that demand for their shares has been declining, with a series of lower highs made each time IRBT has bounced off support the past 5 months. Traders should pay close attention to the price action of IRBT stock this week as it tests $32.40. A break to the downside would trigger a sell signal with their chart showing no levels of support to the downside until the $25- 26 range.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Nov
22

Foot Locker (FL) Stock Jumps After Beating Estimates

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Foot Locker (FL) shares rise after reporting strong revenue and earnings growth

Fueled by stronger than expected same-store sales growth, Foot Locker (FL) reported 3rd Quarter revenues and earnings that easily exceeded analyst expectations, sending shares to a new 52 week high this morning. Foot Locker recorded non-gaap earnings per share of $0.68 on $1.62 billion in sales as same-store sales increased by 4.1% year-over-year, bringing their eps to $2.04 on $4.71 billion in revenue for the first 9 months of 2013. Foot Locker continued their trend of closing unprofitable domestic stores, consolidating in the US while expanding their store base overseas. The company closed 16 stores in the US market while their international store count grew by 208 year-over-year.

During the conference call, management was quite upbeat about the prospects for the current quarter. They are expecting same-store sales growth in the low to mid single digits, currently running in the mid-single digit range for Q4 thus far. CEO Ken Hicks stated that new athletic apparel product launches have been well received so far this quarter, led by Nike (NKE) and their Jordan brand, and expects launches to remain strong throughout the holiday season. Foot Locker also said the implementation of Runners Point Group, acquired earlier this year, has been progressing well. Runners Point Group was profitable for the quarter and management believes they have yet to begin to drive the margin improvements that they see themselves generating there. FL sees margin improvements in current Foot Locker and Footaction stores coming from future price mark-ups, an improved product blend, and better performance from their private branded apparel products.

Foot Locker (FL) stock is a buy at current levels, Management Agrees

Foot Locker remained aggressive with their share buyback in the 3rd Quarter, repurchasing nearly 2 million shares of stock at a cost of $67 million during Q3. FL has bought back almost 5 million shares total in 2013 at a cost of $167 million while simultaneously paying an $0.80 annual dividend. They have $423 million remaining on their current buyback plan and are well ahead of pace to complete it within the allotted 3 years. Their balance sheet remains extremely strong with cash and short-term investments totaling $796 million versus only $140 million in debt.

As of publication, FL stock is up 4% on the day, setting a new 52 week high. I have had a strong buy recommendation on Foot Locker since I published my analysis of them last month with a long-term price target of $58. My thesis is based on the continued strength of long-term trends in the athletic apparel sector, Foot Locker’s leading position in the US athletic shoe retail market, and an assumed gradual appreciation towards fair value (FL currently trades for significantly less than their peers in the athletic apparel industry using just about any valuation metric). I continue to view Foot Locker as a strong buy and one of my top picks in today’s markets.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

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