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Madison Square Garden Co (NYSE:MSG) announced June 27 it was exploring a spinoff of its sports business from its live entertainment segment to create two publicly traded companies.
The consideration bolstered the bullishness of Jefferies and Macquarie.
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The Rating
Macquarie analyst Amy Yong on June 29 upgraded Madison Square Garden from Neutral to Outperform and raised the price target from $302 to $350.
The Thesis
Yong said she was unsurprised by the pending reorganization. (See the analyst's track record here.)
“The board’s announcement to explore a spinoff is not too surprising, given recent clues including discussions around funding needs for the upcoming [Sphere concert venues] and increased private equity interest,” the analyst said.
MSG’s entertainment portfolio will soon expand with the Vegas and London Spheres, an expected aggregate cost of about $1.5 billion that’s only 80-percent financed so far, according to Macquarie.
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Yong expects the new venues to present significant upside to entertainment revenue, with a 2019 compound annual growth rate of 27 percent. The separation of entertainment assets from sports is also seen to unlock value in MSG’s various venues, bookings, productions and joint ventures.
On the sports side, ticket pricing power, media rights revenue and sponsorships could drive 25-percent compound annual growth in 2019. Legalized sports gambling could provide another revenue channel or boost team worth, Yong said.
“We see its pure-play sports assets including the Knicks/Rangers continuing to rise in value on the back of appraisals/transactions,” the analyst said, estimating an aggregate asset value around $5.1 billion.
Price Action
At time of publication, MSG shares were trading up 2.9 ercent at $319.27.
Related Links:
Morgan Stanley Shifts Thesis On Madison Square Garden
How Manchester United, Knicks Wins Correlate With Stock Gains
Photo By Rich Mitchell/Wikimedia.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.