Author Topic: FOXA - Twenty-First Century Fox Inc  (Read 28423 times)

Okonomen

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #80 on: November 16, 2019, 02:00:24 AM »
Can anyone explain to me why the EBITDA-margin in Television is only around 8%? Is it because sports rights are incurred here and in such case, what are the EBITDA-margins on the TV-stations? Afaik sports rights costs are incurred in the cable segment, right? So what is putting so much pressure on Television EBITDA?


Spekulatius

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #81 on: November 16, 2019, 05:25:53 AM »
Can anyone explain to me why the EBITDA-margin in Television is only around 8%? Is it because sports rights are incurred here and in such case, what are the EBITDA-margins on the TV-stations? Afaik sports rights costs are incurred in the cable segment, right? So what is putting so much pressure on Television EBITDA?

According to the Q3 report (Page 17) The EBITDA from Television is $251M/$1356M or ~18.5%. It seems a somewhat low number, but it’s much higher than 8%.
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Okonomen

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #82 on: November 16, 2019, 05:31:14 AM »
Ah yeah was looking at the last couple of fiscal years. Not the most recent Q. Maybe theres some seasonality ? Otherwise i dont understand the huge improvement. Maybe something to do with entertainment?

KJP

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #83 on: November 16, 2019, 05:40:38 AM »
Can anyone explain to me why the EBITDA-margin in Television is only around 8%? Is it because sports rights are incurred here and in such case, what are the EBITDA-margins on the TV-stations? Afaik sports rights costs are incurred in the cable segment, right? So what is putting so much pressure on Television EBITDA?

Sports rights are incurred primarily in the Television segment (Fox Network), not the Cable Segment (primarily Fox News).  See, e.g., this description of the Television segment results in the Q4 2019 earnings release:

Television reported full year segment revenues of $5.98 billion, an increase of $873 million or 17% from the amount in the prior year.      Advertising  revenues  increased  $394  million  or  11%,  primarily  due  to  the addition of Thursday  Night  Football and the broadcast of one additional NFL Divisional Playoff game, record cyclical political advertising revenues at the FOX Television Stations and additional FIFA World Cup matches in the current year.    The increase in advertising revenues was partially offset by the broadcast of two fewer MLB World Series games in the current year compared with the prior year.  Affiliate revenues increased $326 million or 24% led by an increase in programming fees from third-party FOX affiliates.  Other revenues increased $153 million or 62%, primarily due to higher digital content licensing revenues.

That is why Cable earnings are so much higher than Television earnings.  To be sure, Fox does show sports on some of its other cable networks, but those sports rights (NASCAR, college sports, etc.) do not compare to the rights fees Fox TV pays to the NFL, which airs only on Fox Network, not any of the Fox sports cable channels.
« Last Edit: November 16, 2019, 05:44:11 AM by KJP »

Okonomen

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #84 on: November 16, 2019, 10:14:43 AM »
A back-of-the-envelope attempt to value Fox could be this:

Normalized EPS: ~3 USD (earnings will be somewhat lumpy due to political elections, sports events and renegotiations (affiliates and sports rights)
Multiple: 15x (Peers trade lower but Fox has unique assets, significant growth opportunities and a strong moat. S&P trades significantly higher and I think Fox boasts much more quality than peers both on biz model and on balance sheet strength)
Non-core assets ex cash: 7 USD/share (roku stake, STG stake, studio lot and the tax asset. The tax asset alone I value at around 4 USD/share)
Excess cash: 3 USD/share

Total value per share: 55 USD (~64% upside)

I don't really have an idea of how much earnings flow thru the P/L from non-core assets, but I think it's minor?

Have I forgotten something here? EPS considers interest expense so I don't think I forget anything regarding debt. I think it would be double counting to assume share count reduction from the recent buyback announcement

Okonomen

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #85 on: November 30, 2019, 12:04:28 AM »
https://www.valueinvestorsclub.com/idea/NEWS_CORP/5014457469

Dont know what to think about a fox/news corp merger. I have also read statements by rupert murdoch about this being his long term plan, but for me as fox shareholder it kinda complicates things that murdochs owns big states in both... will they be disciplined on price? Hope so

From the article on VIC:

“Finally, following the Fox divestitures, we think the probability has significantly increased that News Corp and the remaining Fox assets are recombined.  Murdoch-owned publications have published sourced articles stating that is Rupert’s eventual intention (e.g. https://www.wsj.com/articles/rupert-murdoch-says-disney-deal-is-a-pivot-not-a-retreat-1513280513) and Rupert himself confirmed that intent is his comments (although the tax structure of the Disney deal means that he has had to be fairly oblique thus far).

Recombining the two businesses makes logical sense, as you have two companies in adjacent industries that share a headquarters building and are controlled by the same shareholder.  News and Fox have ~$500 million of combined corporate costs so the synergies from any deal would be meaningful. Additionally, many of the reasons originally put forth for the split – separating growthier businesses from more mature ones and cleaving off any potential liability stemming from the 2011 UK newspaper matter – are no longer valid now that time has passed and Fox has sold its studio business to Disney.

A recombination would be tax free two years after the Fox/Disney deal closed, which would be March 2021.   We think it’s likely that any recombination will take the form of New Fox tendering for News Corp at a premium and we believe much of News Corp’s renewed focus on boosting its share price may be in anticipation of that deal.  Such a recombination would also likely include a separation of other assets at News, both as the nature/geography of the assets differs significantly (e.g., REA/Move) and potentially as a part of succession planning.”

RadMan24

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #86 on: November 30, 2019, 12:09:11 PM »
A back-of-the-envelope attempt to value Fox could be this:

Normalized EPS: ~3 USD (earnings will be somewhat lumpy due to political elections, sports events and renegotiations (affiliates and sports rights)
Multiple: 15x (Peers trade lower but Fox has unique assets, significant growth opportunities and a strong moat. S&P trades significantly higher and I think Fox boasts much more quality than peers both on biz model and on balance sheet strength)
Non-core assets ex cash: 7 USD/share (roku stake, STG stake, studio lot and the tax asset. The tax asset alone I value at around 4 USD/share)
Excess cash: 3 USD/share

Total value per share: 55 USD (~64% upside)

I don't really have an idea of how much earnings flow thru the P/L from non-core assets, but I think it's minor?

Have I forgotten something here? EPS considers interest expense so I don't think I forget anything regarding debt. I think it would be double counting to assume share count reduction from the recent buyback announcement

Durable cash flows during recession. Cash is always king in recessions and those who spit it off are often re=evaluated.

Spekulatius

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #87 on: November 30, 2019, 06:30:34 PM »
https://www.valueinvestorsclub.com/idea/NEWS_CORP/5014457469

Dont know what to think about a fox/news corp merger. I have also read statements by rupert murdoch about this being his long term plan, but for me as fox shareholder it kinda complicates things that murdochs owns big states in both... will they be disciplined on price? Hope so

From the article on VIC:

“Finally, following the Fox divestitures, we think the probability has significantly increased that News Corp and the remaining Fox assets are recombined.  Murdoch-owned publications have published sourced articles stating that is Rupert’s eventual intention (e.g. https://www.wsj.com/articles/rupert-murdoch-says-disney-deal-is-a-pivot-not-a-retreat-1513280513) and Rupert himself confirmed that intent is his comments (although the tax structure of the Disney deal means that he has had to be fairly oblique thus far).

Recombining the two businesses makes logical sense, as you have two companies in adjacent industries that share a headquarters building and are controlled by the same shareholder.  News and Fox have ~$500 million of combined corporate costs so the synergies from any deal would be meaningful. Additionally, many of the reasons originally put forth for the split – separating growthier businesses from more mature ones and cleaving off any potential liability stemming from the 2011 UK newspaper matter – are no longer valid now that time has passed and Fox has sold its studio business to Disney.

A recombination would be tax free two years after the Fox/Disney deal closed, which would be March 2021.   We think it’s likely that any recombination will take the form of New Fox tendering for News Corp at a premium and we believe much of News Corp’s renewed focus on boosting its share price may be in anticipation of that deal.  Such a recombination would also likely include a separation of other assets at News, both as the nature/geography of the assets differs significantly (e.g., REA/Move) and potentially as a part of succession planning.”

First time I look at NEWS since 2013 or thereabouts. It’s a messy asset with uncertain earnings power. If Murdoch merges this with Fox as is, it won’t create much value and shift the discount to FOX.

I also question the synergies. The fact that both companies occupy the same building doesn’t mean much. Isn’t this mostly WSJ stuff anyways? If so, it couldn’t be rescued when the companies were merged,

I certainly wouldn’t like the deal as a FOX shareholder and I don’t think the bus8ds really fit together. Before anything would happen, NEWS would need to separate off the real estate business, sell, the book publisher and get rid off most of most of the  newspaper assets, imo. I can see that the WSJ might fit into FOX at some point , maybe News could just sell thet piece off, if it makes sense for both entities?
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Okonomen

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #88 on: January 18, 2020, 12:15:47 AM »
Does FOX still own the rights to all their series such as american dad, simpsons, family guy etc? Isn't this part of the entertainment revenue? Or dis DIS also get these content rights?

JRM

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Re: FOXA - Twenty-First Century Fox Inc
« Reply #89 on: January 18, 2020, 04:47:56 AM »
Does FOX still own the rights to all their series such as american dad, simpsons, family guy etc? Isn't this part of the entertainment revenue? Or dis DIS also get these content rights?

Disney owns Family Guy and Simpsons now, I would assume American Dad also.