Value Investors Club / Ascent Media Corporation (ASCMA)

Ascent Media Corporation ASCMA

December 03, 2010 - 11:38am EST by

mjw248

			2010	2011
Price:	34.00	EPS	$0.00	$0.00
Shares Out. (in M):	14	P/E	0.0x	0.0x
Market Cap (in $M):	493	P/FCF	0.0x	0.0x
Net Debt (in $M):	0	EBIT	0	0
TEV (in $M):	0	TEV/EBIT	0.0x	0.0x

Description

This isn't a heroic idea, but I do believe it is low-risk and attractive. It is timely, so the write-up is neccessarily short.

Ascent Media Corporation recently announced two transactions that will result in the sale of the substantial majority of the Company's operating businesses. After these transactions close, Ascent Media's primary assets will be i) cash, ii) investments, iii) state and foreign NOLs, and iv) its systems integration business. The stock is currently trading at a relatively wide discount to pro forma cash and investments (13% upside potential). I don't expect this discount to last.

Ascent has a stated objective to reallocate its capital to investments or business acquisitions that provide enhanced shareholder return opportunities. Given that the Company is controlled by John Malone, I'm not too concerned about management doing something really dumb. In fact, a smart acquisition or investment could be a materially positive catalyst for the stock. In any case, I expect the stock's discount to cash and investments to close relatively quickly, at which point I would recommend exiting the position.

Importantly, I do not believe the recent dispositions will result in a tax liability, but I have not yet confirmed this with someone from the Company.

(Figures in thousands)

			Low		High	Comments

	Enterprise Value		$0	-	$10,000	Value of systems integration business implied by revalution of liability to Sony

	Add: Cash		279,023	-	279,023
	Add: Cash from Assumed Options Exercises		14,062		14,062	All outstanding options; WAEP of $22.73
	Add: Proceeds from Dispositions		181,000	-	181,000	$113 MM for Content Services; $68 MM for Creative Services
	Add: Investments		96,906	-	96,906	Diversified corporate bond funds
	Add: Income Tax Receivable		0	-	15,945	Unclear if this was included in one of the dispositions
	Add: Net Operating Loss Carryforwards		0	-	26,592	$286 .2 MM of state NOLs and $30.9 MM of foreign NOLs
	Less: Debt		0	-	0
	Less: Preferred Stock		0	-	0
	Less: Non-Controlling Interest		0	-	0
	Less: Non-Operating Liabilities		0	-	0
	Equity Value		$570,991	-	$623,528

	Series A Common Stock	13,556
	Series B Common Stock	734
	Options Outstanding	619
	Effective Shares Outstanding	14,909

	Value per Share		$38.30	-	$41.82
	Margin of Safety - Equity	$34.00	11.2%	-	18.7%

Catalyst

Market appreciation for pro forma cash and investments

Sale of systems integration business

Favorable reallocation of captial

Liquidation

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