Credit Suisse Bullish On 'Rare Pure Sports' Play: Manchester United

In a new report, Credit Suisse took a look at Manchester United PLC MANU, a rare pure-play sports investment. Given the secular global growth in the popularity of soccer, Credit Suisse is bullish on Manchester United’s overall outlook.

Investment thesis
Credit Suisse lists four main reasons it likes Manchester United as an investment. First, the company controls the live soccer content of the team, which is one of the most successful sports teams in the world. Analysts see opportunity in both traditional and online video for the company.

Second, as the popularity of soccer continues to grow, particularly in the U.S. and Asia, Manchester United is well-positioned to grow commercial and broadcasting income.

Third, a less-restrictive sponsorship agreement with Addidas AG ADDYY has opened the door for Manchester United to grow its brand via e-commerce and retail avenues.

Finally, Credit Suisse believes that Manchester United's current share price represents an attractive valuation.

Catalysts
Credit Suisse predicts that the company’s stock will likely be sensitive to the team’s performance in the Premier League and the UEFA Champions League tournaments. The Premier League season runs from August to May and the Champions League runs from September to May.

Outlook
Credit Suisse’s valuation process for Manchester United includes assumptions of a 3.0 percent terminal growth rate and weighted average cost of capital (WACC) of 7.0 percent. “We value Manchester United at $23 per share, based on 18.6x 2016 EV/EBITDA, which is in-line with the recent trading range for the stock,” analyst Omar Sheikh explains in the report.

Credit Suisse has a Buy rating on Manchester United.

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