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Continued...)
So when you put it all together here’s what the basic Sum of the Parts looks like for SWM.Currently as of 28 March 2024 the Market Cap is $292.4m and as of 1H FY24 results the business has $257m of net debt making for
a total enterprise value of approx. $549.4m
From this we can subtract the relevant parts of the business.
+$55m current market valuation of SWMs 19.9% stake in ASX:A1N (ARN Media) as of 28 March 2024. This estimate places no upside valuation upon the likely completion of the SXL/A1N merger which according to ARN management guidance on 18 October 2023
‘is expected to deliver at least double-digit pro forma earnings accretion for existing ARN shareholders in the year of acquisition.’
https://hotcopper.com.au/threads/ann-non-binding-indicative-proposal-to-acquire-sca.7641439/?get_post=true
+$100m valuation of 50% of TX Australia owned by SWM (based upon the
approx.$200m offer received from Axicom for 100% of TX Australia with an underbid close to this price by BAI Communications during the sales campaign in 2020 which was led by Investment Bank Goldman Sachs)
+$126m valuation of Prime Media Group (based upon $41.3M EBITDA X 2.9 Multiple as per Lonergan and Edwards Independent Expert Report +
$6.3m valuation of Property acquired in ACT as part of the Prime Acquisition and not yet sold).
+$400m valuation of Seven Studios (based upon an analyst report by Eric Choi at UBS).
This does not include an upward revaluation due to the producer offset tax change as of 1st July 2024 which increases Seven Studios profit after tax by $10m+ per annum )
+$150m valuation of Media Bargaining Code News income from Google (valued at 5x yearly earnings which is the length of the first Google contract with Seven and is the expected length of new contracts with other publishers which are being renewed this year.)
+$105.25m valuation of Seven West Ventures Portfolio (based upon FY23 Year end
$100m valuation
+$5.25m ASX:MPA investment)
=$386.8m of value above the current enterprise value before you even include the core business which is 7plus (BVOD), West Australian Newspapers and Channel 7 noting that the linear tv business (excluding Seven Studio program sales) still makes
$51 million EBIT , the digital business (excluding News Media Bargaining Income) including 7plus makes approx.
$104m EBIT and the West Australian (excluding News Media Bargaining Income) makes
$24m EBIT (page 7 and page 8 , Seven West Media 2023 Full Year Results- Investor Presentation)
This means that at current market prices you can acquire for nothing the highly profitable core business of Seven West Media which after subtracting corporate costs (page 8, Seven West Media 2023 Full Year Results - Investor Presentation)makes approximately $162m EBIT.
Normally to acquire a mature listed company with $162M of EBIT on the ASX this would cost north of $1.25 billion - with SWM at these current ridiculously undervalued prices you get that same $162m in EBIT for freeAs mentioned earlier I think that in the fullness of time the current melodramatic pessimism will pass and SWM will trade at a healthy market multiple but in the meantime shareholders can rest easy knowing that they have purchased a wonderful business which is well managed and which even on the sum of the parts is worth far,far more than current market prices.
(20min delay)
