MSGN - MSG = +30%

January 20, 2016 09:00 AM
MSGN - MSG = +30%

MSGN - MSG = +30%

On Oct. 1, 2015, The Madison Square Garden Co. completed its spin-off from the new media-centric MSG Networks (MSGN) and is trading under the ticker symbol MSG (see “Split squad”). Stockholders received one share of the “new” MSG for each three shares of MSGN that they held.

Madison Square Garden (the spin-off) is known for its legendary Madison Square Garden Arena. The company owns or operates additional venues, including Radio City Music Hall, the Chicago Theatre and the Beacon Theater. MSG also owns the New York Knicks basketball franchise and the New York Rangers hockey club. MSG Networks creates, produces and distributes content through its programming networks and other media assets. 

We are optimistic about MSG’s post-spin-off positioning. We expect MSG to record higher revenues during the second quarter of 2016, as the company has planned a variety of events for the holiday season. MSG plans to present a 75-show engagement for the Rockettes from June to August, a period when New York City experiences a significant increase in tourism. MSG Sports continues to benefit from strong contractual relationships with the broadcasters, including MSGN. The new long-term media rights agreements with MSGN, as well as higher professional sports’ teams ticket-related revenue and sponsorship, signage revenue and higher suite rental fee revenue, are driving strong performance. 

Based on a peer group median multiple of 5.4x fiscal year 2016 EBITDA and utilizing Forbes’ team value estimates (Knicks, $2.5 billion; Rangers, $1.1 billion), we value MSG at $5.2 billion or $210 per share (see “Valuation calculation”). This suggests a 30% upside from its recent price of $160.45.

About the Author

Joe Cornell is a chartered financial analyst, a finance MBA and the author of McGraw-Hill’s “Spin-Off To Pay-Off.” As the founder and publisher of Spin-Off Research (www.spinoffresearch.com) he is widely-regarded to be among the foremost experts in this specialized area. @spinoffresearch