SAGA COMMUNICATIONS INC SGA
February 17, 2023 - 12:18pm EST by
blackstone
2023 2024
Price: 24.25 EPS 0 0
Shares Out. (in M): 6 P/E 0 0
Market Cap (in $M): 147 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 116 TEV/EBIT 0 0

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Description

The Opportunity

Saga has been written up a few times before....both posters touted the company's balance sheet strength, resilient business model (focused on secondary and tertiary, stable markets), and prodigious free cash flow generation. There has unfortunately been a meaningful change since the most recent post and that is that Ed Christian, the company's founder, passed away in August of 2022. We had very warm feelings towards Ed who was admittedly a complicated figure. I thought this was a wonderful tribute to him https://radioink.com/2022/08/23/my-boss-quit-today/?vgo_ee=tg0wDSBX0EX8vl7jG4G3fuL1unxA0hj7N4lZ0JN1HqE%3D

Ed loved radio-his enthusiasm was infectious when you'd meet with him. He also loved his B shares as he said with a smile when we suggested he collapse the share structure. Now that he passed away the estate's B shares converted to regular class A stock and there is no longer an impediment to someone making an offer to acquire the company https://www.insideradio.com/free/saga-rejects-unsolicited-takeover-bid-from-jeff-warshaw-led-group/article_d236658c-76db-11ed-b21b-57fb4b17f6d7.html

 Ed was resistant to suggestions about capital allocation and, perhaps borne of his experience with leverage headed into 2008, husbanded cash on the balance sheet in anticipation of acquisitions that never really came to pass in a meaningful way. Since his passing there have been two press releases worth noting:

 

 

To summarize, the company has paid $4/share in special dividends and is now paying $1/share on an annual basis for a 4.1% base yield. In addition based on our assumption that the company can comfortably generate 16-18mm in FCF there would be 11-12.5mm in cash or $1.80-2.10/share available for a special dividend. In combination with the base dividend that would be $2.80-$3.10/share for a 11.4-12.5% current yield. The company is run quite conservatively and we expect that level of FCF to be attainable in most economic environments.

Company Description (from most recent 10k)

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties. As of February 28, 2022, we owned seventy-nine FM, thirty-four AM radio stations and seventy-nine metro signals serving twenty-seven markets.

 

List of Markets and Stations

Station

   

Market (1)

   

Format

    

Class (2)

    

FCC Authorization

 

 

 

 

 

 

 

 

 

 

 

FM:

 

  

 

 

 

  

 

  

 

WOXL

 

Asheville, NC

 

Hot Adult Contemporary

 

C2

 

December 1, 2027

 

WTMT

 

Asheville, NC

 

Classic Rock

 

C2

 

December 1, 2027

 

KISM

 

Bellingham, WA

 

Classic Rock

 

C

 

February 1, 2030

 

KAFE

 

Bellingham, WA

 

Adult Contemporary

 

C

 

February 1, 2030

 

WRSY

 

Brattleboro, VT

 

Adult Album Alternative

 

A

 

April 1, 2022

(3)

WKVT

 

Brattleboro, VT

 

Classic Hits

 

A

 

April 1, 2022

(3)

WQEL

 

Bucyrus, OH

 

Classic Hits

 

A

 

October 1, 2028

 

WLRW

 

Champaign, IL

 

Hot Adult Contemporary

 

B

 

December 1, 2028

 

WIXY

 

Champaign, IL

 

Country

 

B1

 

December 1, 2028

 

WREE

 

Champaign, IL

 

Classic Hits

 

B1

 

December 1, 2028

 

WYXY

 

Champaign, IL

 

Classic Country

 

B

 

December 1, 2028

 

WAVF

 

Charleston, SC

 

Adult Variety Hits

 

C

 

December 1, 2027

 

WCKN

 

Charleston, SC

 

Contemporary Country

 

C1

 

December 1, 2027

 

WMXZ

 

Charleston, SC

 

Hot Adult Contemporary

 

C2

 

December 1, 2027

 

WXST

 

Charleston, SC

 

Urban Adult Contemporary

 

C1

 

December 1, 2027

 

WWWV

 

Charlottesville, VA

 

Classic Rock

 

B

 

October 1, 2027

 

WQMZ

 

Charlottesville, VA

 

Adult Contemporary

 

A

 

October 1, 2027

 

WCNR

 

Charlottesville, VA

 

Adult Album Alternative

 

A

 

October 1, 2027

 

WCVL

 

Charlottesville, VA

 

Contemporary Country

 

A

 

October 1, 2027

 

WCVQ

 

Clarksville, TN/Hopkinsville, KY

 

Hot Adult Contemporary

 

C1

 

August 1, 2028

 

WZZP

 

Clarksville, TN/Hopkinsville, KY

 

Rock

 

A

 

August 1, 2028

 

WVVR

 

Clarksville, TN/Hopkinsville, KY

 

Contemporary Country

 

C0

 

August 1, 2028

 

WRND

 

Clarksville, TN/Hopkinsville, KY

 

Classic Hits

 

A

 

August 1, 2028

 

WSNY

 

Columbus, OH

 

Adult Contemporary

 

B

 

October 1, 2028

 

WNNP

 

Columbus, OH

 

Classic Hits

 

A

 

October 1, 2028

 

WNND

 

Columbus, OH

 

Classic Hits

 

A

 

October 1, 2028

 

WVMX

 

Columbus, OH

 

Hot Adult Contemporary

 

A

 

October 1, 2028

 

WLVQ

 

Columbus, OH

 

Classic Rock

 

B

 

October 1, 2028

 

KSTZ

 

Des Moines, IA

 

Hot Adult Contemporary

 

C

 

February 1, 2029

 

KIOA

 

Des Moines, IA

 

Classic Hits

 

C1

 

February 1, 2029

 

KAZR

 

Des Moines, IA

 

Rock

 

C1

 

February 1, 2029

 

KOEZ

 

Des Moines, IA

 

Soft Adult Contemporary

 

C1

 

February 1, 2029

 

WHAI

 

Greenfield, MA

 

Adult Contemporary

 

A

 

April 1, 2022

(3)

WPVQ

 

Greenfield, MA

 

Contemporary Country

 

A

 

April 1, 2022

(3)

WMQR

 

Harrisonburg, VA

 

Adult Contemporary

 

B1

 

October 1, 2027

 

WQPO

 

Harrisonburg, VA

 

Contemporary Hits

 

B

 

October 1, 2027

 

WSIG

 

Harrisonburg, VA

 

Classic Country

 

B1

 

October 1, 2027

 

WWRE

 

Harrisonburg, VA

 

Classic Hits

 

A

 

October 1, 2027

 

WOEZ

 

Hilton Head Island, SC

 

Classic Hits

 

C3

 

December 1, 2027

 

WLHH

 

Hilton Head Island, SC

 

Soft Adult Contemporary

 

C3

 

December 1, 2027

 

WVSC

 

Hilton Head Island, SC

 

Adult Contemporary

 

C3

 

December 1, 2027

 

WYXL

 

Ithaca, NY

 

Adult Contemporary

 

B

 

June 1, 2022

(3)

WQNY

 

Ithaca, NY

 

Contemporary Country

 

B

 

June 1, 2022

(3)

WIII

 

Ithaca, NY

 

Classic Rock

 

B

 

June 1, 2022

(3)

WFIZ

 

Ithaca, NY

 

Contemporary Hits

 

A

 

June 1, 2022

(3)

 

8

 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

Station

 

FCC Station

 

Expiration Date of

 

Station

  

Market (1)

  

Format

  

Class (2)

   

FCC Authorization

 

KEGI

 

Jonesboro, AR

 

Classic Rock

 

C2

 

June 1, 2028

 

KDXY

 

Jonesboro, AR

 

Contemporary Country

 

C3

 

June 1, 2028

 

KJBX

 

Jonesboro, AR

 

Adult Contemporary

 

C3

 

June 1, 2028

 

WKNE

 

Keene, NH

 

Hot Adult Contemporary

 

B

 

April 1, 2022

(3)

WSNI

 

Keene, NH

 

Adult Contemporary

 

A

 

April 1, 2022

(3)

WINQ

 

Keene, NH

 

Contemporary Country

 

A

 

April 1, 2022

(3)

WZID

 

Manchester, NH

 

Adult Contemporary

 

B

 

April 1, 2022

(3)

WMLL

 

Manchester, NH

 

Classic Rock

 

A

 

April 1, 2022

(3)

WKLH

 

Milwaukee, WI

 

Classic Rock

 

B

 

December 1, 2028

 

WHQG

 

Milwaukee, WI

 

Rock

 

B

 

December 1, 2028

 

WRXS

 

Milwaukee, WI

 

Pure Oldies

 

A

 

December 1, 2028

 

WJMR

 

Milwaukee, WI

 

Urban Adult Contemporary

 

A

 

December 1, 2028

 

KMIT

 

Mitchell, SD

 

Contemporary Country

 

C1

 

April 1, 2029

 

KUQL

 

Mitchell, SD

 

Classic Hits

 

C1

 

April 1, 2029

 

WNOR

 

Norfolk, VA

 

Rock

 

B

 

October 1, 2027

 

WAFX

 

Norfolk, VA

 

Classic Rock

 

C

 

October 1, 2027

 

WOGK

 

Ocala, FL

 

Contemporary Country

 

C0

 

February 1, 2028

 

WYND

 

Ocala, FL

 

Classic Rock

 

A

 

February 1, 2028

 

WNDD

 

Ocala, FL

 

Classic Rock

 

A

 

February 1, 2028

 

WNDN

 

Ocala, FL

 

Classic Rock

 

A

 

February 1, 2028

 

WRSI

 

Northampton, MA

 

Adult Album Alternative

 

A

 

April 1, 2022

(3)

WPOR

 

Portland, ME

 

Contemporary Country

 

B

 

April 1, 2022

(3)

WCLZ

 

Portland, ME

 

Adult Album Alternative

 

B

 

April 1, 2022

(3)

WMGX

 

Portland, ME

 

Hot Adult Contemporary

 

B

 

April 1, 2022

(3)

WYNZ

 

Portland, ME

 

Classic Hits

 

B1

 

April 1, 2022

(3)

KICD

 

Spencer, IA

 

Contemporary Country

 

C1

 

February 1, 2029

 

KMRR

 

Spencer, IA

 

Adult Contemporary

 

C3

 

February 1, 2029

 

WLZX

 

Springfield, MA

 

Classic Rock

 

A

 

April 1, 2022

(3)

WAQY

 

Springfield, MA

 

Alternative Rock

 

B

 

April 1, 2022

(3)

WYMG

 

Springfield, IL

 

Classic Rock

 

B

 

December 1, 2028

 

WLFZ

 

Springfield, IL

 

Contemporary Country

 

B

 

December 1, 2028

 

WDBR

 

Springfield, IL

 

Contemporary Hits

 

B

 

December 1, 2028

 

WTAX

 

Springfield, IL

 

News/Talk

 

B1

 

December 1, 2028

 

WNAX

 

Yankton, SD

 

Contemporary Country

 

C1

 

April 1, 2029

 

 

 

 

 

 

 

 

 

 

 

AM:

 

 

 

 

 

 

 

 

 

WISE

 

Asheville, NC

 

Sports/Talk

 

B

 

December 1, 2027

 

WYSE

 

Asheville, NC

 

Sports/Talk

 

D

 

December 1, 2027

 

KGMI

 

Bellingham, WA

 

News/Talk

 

B

 

February 1, 2030

 

KPUG

 

Bellingham, WA

 

Sports/Talk

 

B

 

February 1, 2030

 

KBAI

 

Bellingham, WA

 

Classic Hits

 

B

 

February 1, 2030

 

WINQ

 

Brattleboro, VT

 

News/Talk

 

C

 

April 1, 2022

(3)

WBCO

 

Bucyrus, OH

 

Classic Country

 

D

 

October 1, 2028

 

WSPO

 

Charleston, SC

 

Gospel

 

B

 

December 1, 2027

 

WINA

 

Charlottesville, VA

 

News/Talk

 

B

 

October 1, 2027

 

WVAX

 

Charlottesville, VA

 

Sports/Talk

 

C

 

October 1, 2027

 

WQEZ

 

Clarksville, TN/Hopkinsville, KY

 

Soft Adult Contemporary

 

D

 

August 1, 2028

 

WKFN

 

Clarksville, TN

 

Sports/Talk ESPN

 

D

 

August 1, 2028

 

WNZE

 

Clarksville, TN

 

News/Talk

 

C

 

August 1, 2028

 

KRNT

 

Des Moines, IA

 

Sports

 

B

 

February 1, 2029

 

KPSZ

 

Des Moines, IA

 

Christian

 

B

 

February 1, 2029

 

9

 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

Station

 

FCC Station

 

Expiration Date of

 

Station

   

Market (1)

  

Format

  

Class (2)

     

FCC Authorization

 

WHMQ

 

Greenfield, MA

 

News/Talk

 

C

 

April 1, 2022

(3)

WPVQ

 

Greenfield, MA

 

Country Legends

 

D

 

April 1, 2022

(3)

WSVA

 

Harrisonburg, VA

 

News/Talk

 

B

 

October 1, 2027

 

WHBG

 

Harrisonburg, VA

 

Sports ESPN

 

D

 

October 1, 2027

 

WHCU

 

Ithaca, NY

 

News/Talk

 

B

 

June 1, 2022

(3)

WNYY

 

Ithaca, NY

 

Oldies

 

B

 

June 1, 2022

(3)

WKBK

 

Keene, NH

 

News/Talk

 

B

 

April 1, 2022

(3)

WZBK

 

Keene, NH

 

Classic Hits

 

D

 

April 1, 2022

(3)

WFEA

 

Manchester, NH

 

News/Talk

 

B

 

April 1, 2022

(3)

WJOI

 

Milwaukee, WI

 

Christian

 

C

 

December 1, 2028

 

WHMP

 

Northampton, MA

 

News/Talk

 

C

 

April 1, 2022

(3)

WGAN

 

Portland, ME

 

News/Talk

 

B

 

April 1, 2022

(3)

WZAN

 

Portland, ME

 

Country Legends

 

B

 

April 1, 2022

(3)

WBAE

 

Portland, ME

 

Soft Adult Contemporary

 

C

 

April 1, 2022

(3)

WVAE

 

Portland, ME

 

Soft Adult Contemporary

 

C

 

April 1, 2022

(3)

KICD

 

Spencer, IA

 

News/Talk

 

C

 

February 1, 2029

 

WLZX

 

Springfield, MA

 

Alternative Rock

 

D

 

April 1, 2022

(3)

WTAX

 

Springfield, IL

 

News/Talk

 

C

 

December 1, 2028

 

WNAX

 

Yankton, SD

 

News/Talk

 

B

 

April 1, 2029

 

 

You can see from the above table that the company has shied away from larger markets and their business is 88% local which is relatively well shielded from some of the irrational price action that we've seen in the national ad market. While their markets aren't growthy, per se, they are pretty stable which was Ed's intention from the get-go.
 

Recent Financials

 

 

Management

 

The long-time CFO, Sam Bush, is a reliable, steady hand who had spent decades as Ed's right hand man. The new CEO, Chris Forgy, is another long-time Saga employee. We met him when we visited the company's headquarters and think his DNA is similar to Ed's. We'd expect things to be business as usual despite the loss of Ed. The return of capital is reassuring and I believe management won't make any bold moves on the m&a front as Ed was really the driver of that initiative.

 

Conclusion

Saga is a sleepy company with a fairly predictable cashflow profile. The recent bid for the company that was rejected by the board was at a 14-26% premium to the current price (adjusted for the special dividend that was paid in the interim). In the meantime, the stock offers a double digit dividend yield which, in an uncertain environment, is fairly attractive. 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

  • The company continues to pay special dividends 
  • The company is acquired
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