news corp

Corsair Capital Q3 Letter: Bullish Case for News Corp

Corsair Capital Q3 Letter via Market Folly

We believe NWSA represents a classic undervalued spinoff investment, created by a large cap company spinning off its smaller, less exciting businesses. The spinoff of News Corp (NASDAQ:NWSA) caused – what we often refer to as – a “prisoner exchange” of shareholders. Old News Corp shareholders interested in a pure play growth investment held onto their Twenty-First Century Fox Inc (NASDAQ:FOXA) (21st Century Fox) stock, but dumped the News Corp spinoff, presenting an opportunity for a new base of investors to take advantage of the selling pressure in News Corp.

Corsair Capital Q3 Letter: Bullish Case for News Corp

The misperception of News Corp (NASDAQ:NWSA) as a shrinking newsprint business enabled new investors to purchase several growing video/digital assets (which contribute approximately 50% of the company’s EBITDA) at a cheap valuation. With solid cash generative businesses, a net-cash rich balance sheet of almost $4.00 per share and a management team focused on creating shareholder value, News Corp shares offer limited downside and upside of a $25.00 stock price in the next 12 months. Potential catalysts include accretive acquisitions, share buybacks, a growing dividend policy, more bullish sell-side coverage and a re-rating of the stock.

News Corp business summary

“The companies that make up the new News Corp. are some of the most extraordinary and brilliant brands in the world… they’re undervalued and I believe underdeveloped, but all that changes starting today.” – Chairman Rupert Murdoch

News Corp (NASDAQ:NWSA) is a collection of global media assets with renowned brands in publishing, information services, cable sports, cable service and digital real estate classifieds.

News Corp valuation

“My goal for the new News Corp. is to compress the success time line of the original News Corp. from 60 years to 10 years.” – Chairman Rupert Murdoch

We have valued the company on a Sum-of-the-Parts basis. At $16.00 per share, NWSA is trading for only 4.7x 2014 adjusted EBITDA, being valued in the market as a low quality publishing business, despite the nonpublishing assets contributing almost half of 2014 EBITDA. By comparison, New York Times (“NYT”) trades for 6.5x 2014 EBITDA and we believe this is a good comparable for NWSA’s U.S. publishing unit. Therefore, we value the News and Information segment at 4x-6x 2014 EBITDA, which takes into account the lower quality Australian and U.K. publishing assets.

H/T Market Folly

Corsair Capital’s Thesis on News Corp

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Welcome in the new year by signing up up for ValueWalkPremium today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 1/31/2019 or after next 30 23 subscribers take advantage whichever comes first – please do not share this discount with others

 

0