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: 0 TEV/EBIT 0.0x 0.0x

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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
    sort by   Expand   New

    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

    Messages


    SubjectTiming
    Entry12/03/2010 01:46 PM
    MemberSeastreak
    How long can he go without doing a deal and having a shell company with cash as an asset under SEC rules?  Its basically a SPAC without the warrants now.

    SubjectRE: RE: Monitronics
    Entry12/08/2010 12:05 AM
    Memberthrive25
    Olivia - Can you elaborate on the acquiring / amortizing relationships from dealers - are they capitalizing these purchases?

    SubjectRE: RE: RE: Monitronics
    Entry12/08/2010 12:39 AM
    Memberthrive25
    It does seem that EBITDA is the wrong metric to evaluate Monitronics.  The biggest line item is acquisitions of subscriber accounts - of which a large proportion seem to be maintenance related, rather than growth.  For 2005 and 2006 the company invested ~200MM in acquiring subscribers while revenue grew by 18% from 165MM in 2005 to around 191MM for ttm of 2007 (EBITDA grew by less ~13% as cash margins dropped).  A delta of 15 of EBITDA on the 2 year period implies a 7.5 cash on cash return (over 200MM investment) over two years.  Granted economies will eventually improve margins and returns but still seems like an investment intensive model.  There seems to be a lot of churn here, no?
     
    On the 280MM in revenues and 185 EBITDA, if we assume D&A is around $133 or ~47% of revenues (as was in 2007), and assume 75% is maintenance (ballparking it based on cashflow statement), we get around $100 in EBIT.  At $1 Billion still attractive if levered up appropriately and taxes are kept low.  Do my assumptions / logic seem reasonable?  Thoughts?  These are all back of the envelop calculations, so I might be totally off.
     
    Thanks for the idea....
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